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enMon, 19 Nov 2018 15:53:00 -0600Mon, 19 Nov 2018 15:53:00 -0600Money-Supply Growth Falls to 8-Month Low as Mortgage Rates Risehttps://mises.org/node/44778
<p>Money supply growth slowed in October, falling to the lowest rate recorded since February of this year. Overall, money-supply growth remains well below the growth rates experienced from 2009 to 2016, and has fluctuated very little since March.</p>
<p>In October, year-over-year growth in the money supply was at 3.7percent. That was down from September's growth rate of 4.5 percent, but was up from October 2017's rate of 3.0 percent.</p>
<div><div class="media media-element-container media-image_no_caption"><a href="https://mises.org/sites/default/files/styles/max_1160/public/tms1_1.png?itok=eDi_w-Wh" title="tms1.png" class="colorbox" data-colorbox-gallery="gallery-file-78612-z198Sd1J92g" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/max_full/public/tms1_1.png?itok=3Ge0WMkh" width="693" height="501" alt="tms1_1.png" title="" /></a></div><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/tms.PNG?itok=Og0SK9Ud" rel="noopener noreferrer" target="_blank" title="tms.PNG"> </a></div>
<p>The money-supply metric used here — <a href="https://mises.org/library/austrian-definitions-supply-money"> the "true" or Rothbard-Salerno money supply measure (TMS) </a> — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers <a href="https://mises.org/austrian-school/money-supply"> regular updates </a> on this metric and its growth.</p>
<p>This measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short-time deposits, traveler's checks, and retail money funds).</p>
<p>M2 growth rose in October 2018, rising 3.7 percent, compared to September's rate of 3.9 percent. M2 grew 5.0 percent in October of last year. Like the TMS measure, the M2 growth rate has fallen considerably since late 2016, but has varied little in recent months.</p>
<p>Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of falling money-supply growth.</p>
<div><div class="media media-element-container media-image_no_caption"><a href="https://mises.org/sites/default/files/styles/max_1160/public/tms3_1.png?itok=ghwXBRYB" title="tms3.png" class="colorbox" data-colorbox-gallery="gallery-file-78613-z198Sd1J92g" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/max_full/public/tms3_1.png?itok=HajQS1Gt" width="693" height="465" alt="tms3_1.png" title="" /></a></div><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/re_loans.PNG?itok=g3bEKqqv" rel="noopener noreferrer" target="_blank" title="re_loans.PNG"> </a></div>
<p>Many factors contribute to these trends. In recent months, money supply growth — in both M2 and TMS — has likely been impacted by falling growth rates in<a href="https://fred.stlouisfed.org/series/REALLN" rel="noopener noreferrer" target="_blank"> real estate loans at commercial banks</a>. In October, real estate loans grew 3.2 percent, year over year, which was a 46-month low. The demand for mortgage loans has softened as mortgage rates have risen. In October, the 30-year,<a href="https://fred.stlouisfed.org/series/MORTGAGE30US"> fixed average mortgage rate </a>reached 4.8 percent, which was a 90-month high.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises.org/sites/default/files/styles/max_1160/public/tms2_0.png?itok=aCOV3hkH" title="tms2.png" class="colorbox" data-colorbox-gallery="gallery-file-78614-z198Sd1J92g" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/max_full/public/tms2_0.png?itok=3bV-XptU" width="693" height="464" alt="tms2_0.png" title="" /></a></div>
Ryan McMaken<img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/slideshow/public/franklin.PNG?itok=rYpBxLkl" width="240" alt="franklin.PNG" />44778November 19, 2018 - 3:45 PMFront page feedThe Evolution of Mises' Monetary Thoughthttps://mises.org/node/12230
<p>In this 32-minute talk, Jörg Guido Hülsmann examines and summarizes Mises's insights and innovations in understanding money, its origins, and its purposes. Presented at the <a href="https://mises.org/library/supporters-summit-2011-vienna">2011 Supporters Summit </a>in Vienna, Austria, on 20 September 2011. Includes an introduction by Douglas E. French.</p>
Jörg Guido Hülsmann<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/Currency_750x516.jpg?itok=g1AlJa8Z" width="240" alt="Currency_750x516.jpg" />12230November 19, 2018 - 2:00 PMFront page feedHow the Nazis Converted German Agriculture to Socialismhttps://mises.org/node/44695
<p>In <em> <a href="https://mises.org/sites/default/files/Human%20Action_3.pdf"> Human Action </a> </em> , Ludwig von Mises identified two patterns for the realization of socialism. The first, which he called “the Lenin or the Russian pattern” is “purely bureaucratic. All plants, shops, and farms are formally nationalized.” The second pattern, Mises said, is “the Hindenburg or German pattern,” and Mises claims that this was the means by which the Nazis established socialism in Germany.</p>
<p>Mises goes on to describe what this pattern of socialism looks like:</p>
<blockquote><p>The second pattern . . . nominally and seemingly preserves private ownership of the means of production and keeps the appearance of ordinary markets, prices, wages, and interest rates. There are, however, no longer entrepreneurs, but only shop managers (<em>Betriebsführer</em> in the terminology of the Nazi legislation). These shop managers are seeming instrumental in the conduct of the enterprises entrusted to them; they buy and sell, hire and discharge workers and remunerate their services, contract debts and pay interest and amortization. But in all their activities they are bound to obey unconditionally the orders issued by the government’s supreme office of production management. This office (the <em>Reichswirtschaftsministerium</em> in Nazi Germany) tells the shop managers what and how to produce, at what prices and from whom to buy, at what prices and to whom to sell. It assigns every worker to his job and fixes his wages. It decrees to whom and on what terms the capitalists must entrust their funds. Market exchange is merely a sham. All the wages, prices, and interest rates are fixed by the government; they are wages, prices, and interest rates in appearance only; in fact they are merely quantitative terms in the government’s orders determining each citizen’s job, income, consumption, and standard of living. The government directs all production activities. The shop managers are subject to the government, not to the consumers’ demand and the market’s price structure. This is socialism under the outward guise of the terminology of capitalism. Some labels of the capitalistic market economy are retained, but they signify something entirely different from what they mean in the market economy. (pp. 713-14)</p></blockquote>
<p>Although a comprehensive study of the Nazi economy demonstrating that the Nazis did, indeed, fit the characteristics of this pattern of socialism would require a book, the easiest place to look for historical examples is the <em>Reichsnährstand</em> (the Reich Food Estate or Reich Food Corporation, depending on the translation), which took control of the entire German agricultural industry – one fourth of the entire German economy during the Nazi reign.</p>
<p>The Estate was founded in September of 1933, less than a year after the Nazis came to power, and it was headed by the Nazi Minister of Agriculture, R. Walther Darré. In his early propaganda, we can see Darré clearly demonstrating Mises’s observation that this pattern of socialism operates “under the outward guise of the terminology of capitalism.” Indeed, an anti-Nazi publication criticized the newly established Reich Food Estate for allowing Darré to decide</p>
<blockquote><p>(1) Whether the farmer can cultivate his own property or whether he has to join an association.</p>
<p>(2) What and how much he has to cultivate.</p>
<p>(3) What and when he must sell.</p>
<p>(4) To whom and at what price he must sell.</p>
<p>(5) The price at which the buyer resells it.<a class="see-footnote" id="footnoteref1_7ye6w40" title="Das Neue Tage-Buch, I (Sept. 23, 1933), 303." href="#footnote1_7ye6w40">1</a></p></blockquote>
<p>Darré responded by saying that, although farmers had nationalistic obligations, they must be free. In a speech addressing these claims, he said:</p>
<blockquote><p>We demand that each farmer freely submit to relentless discipline; we order him as a soldier in the battle for food – but we must give him freedom, so he can fulfill his national obligation. <em> We can make strict economic and cultural demands only on farmers who live freely on their own soil </em> . (emphasis added)<a class="see-footnote" id="footnoteref2_4egonnf" title="Der Deutsche Volkswirt, VIII (Jan. 19, 1934), 676." href="#footnote2_4egonnf">2</a></p></blockquote>
<p>What Darré was referring to when he called for farmer “freedom” was not the freedom to use his property as he saw fit and to engage in voluntarily exchange, but, in fact, quite the opposite. As historian Clifford R. Lovin put it:</p>
<blockquote><p>Darré felt that farmers were only free if they could till the soil without fear that this right could be taken away from them. One of the ways to guarantee this freedom was to withdraw the farmer from the free market, the fluctuations of which often reduced his income to a substandard level.<a class="see-footnote" id="footnoteref3_8q4f7qs" title="Clifford R. Lovin, “Agricultural Reorganization in the Third Reich: The Reich Food Corporation (Reichsnährstand), 1933-1936,” Agricultural History 43, no. 4 (1969): 447–62." href="#footnote3_8q4f7qs">3</a></p></blockquote>
<p>Here we see a claim that sounds like the guarantee of property rights, but in fact, Darré’s “guarantee” that the farmer will retain his land was based on a law that entirely removed property rights: the Hereditary Farm Law ( <em>Reichserbhofgesetz</em>). In this law, farmers were protected from having their land foreclosed on (which the Food Estate ensured by taking control of credit cooperatives), but they were also <em>permanently legally bound to their land</em>. According to this law, any plot of land above 308 hectares could never be divided, sold, or used as collateral for loans. Rather than protecting the rights of property, this law entirely removed the rights of farmers to do with their land as they pleased and effectively forced German farmers into a new form of serfdom in which the Food Estate served as the Feudal Lord. This was Darré’s concept of “freedom” and “property rights.”<a class="see-footnote" id="footnoteref4_mo7x7xa" title="Henry Spiegel, “Land Inheritance under the Swastika,” Agricultural History, XIII (Oct. .1939), 176-188." href="#footnote4_mo7x7xa">4</a></p>
<p>Lovin also writes that the primary purpose of the Food Estate, according to Darré, was “to relieve the farmer of the uncertainties of a capitalistic market economy so he could serve his nation better as both a food producer and culture bearer.”<a class="see-footnote" id="footnoteref5_8ti4hmz" title="Lovin, “Agricultural Reorganization in the Third Reich.”" href="#footnote5_8ti4hmz">5</a></p>
<p>Although Lovin almost certainly was unaware of Mises’s characterization of “socialism of the German pattern,” he describes it quite clearly: “The varied duties and responsibilities of the corporation were to be administered by a vast, highly organized bureaucracy.” Subordinate to the bureau of the Food Estate itself were a multitude of sub-bureaus, such as the Policy Department, the Administrative Department, and the various Central Bureaus that controlled everything from agricultural education, credit practices, soil maintenance, forestry, household economy, animal husbandry, youth organizations, agricultural propaganda, exports and imports, and (of course) every agricultural product produced, which was each governed by its own sub-bureaucracy. <a class="see-footnote" id="footnoteref6_5fyxk6c" title="Lovin." href="#footnote6_5fyxk6c">6</a></p>
<p>The “Market Bureau” consisted of an assortment of unions ( <em>Hauptvereinigungen</em>), “which included all individuals involved in the production, processing, and sale of one crop or group of crops.” Even though they were ostensibly independent, the unions “followed policy lines laid down by the Food Corporation.” Such policies were decided upon by an “administrative council” composed of “intelligent experts . . . who should work together on the formation of market conditions in responsible and imaginative ways,” and a “price board” that set the exchange rates for each commodity.<a class="see-footnote" id="footnoteref7_yihw1a2" title="Lovin." href="#footnote7_yihw1a2">7</a></p>
<p>In more recent literature, historian Tiago Saraiva has written about the Food Estate’s Seed Decree, which exercised considerable control over the development and regulation of new strains of crops. New varieties of any crop had to be approved by a sub-bureau of the Food Estate, the Biological Imperial Institute for Agriculture and Forestry, before being allowed to go into cultivation. Out of the several hundred new varieties of seed that were inspected, only sixty-four were approved for German production and consumption, and those that were approved were given legally fixed prices. As Saraiva puts it, “it was not for the market to decide the value of a variety; such value was defined at the [Biological Imperial Institute] in accordance with the general food policy of the regime as established by the [Food Estate].”<a class="see-footnote" id="footnoteref8_wqk07gw" title="Tiago Saraiva, Fascist Pigs: Technoscientific Organisms and the History of Fascism (Cambridge, MA: The MIT Press, 2016), 86." href="#footnote8_wqk07gw">8</a></p>
<p>In agreement with Lovin, Saraiva writes that “the truth is that the setting up of [the Food Estate], taking over the numerous pre-existent associations and societies of agriculture in Germany, by establishing fixed prices and controlling production, marked the end of the free market for agriculture in the country.”<a class="see-footnote" id="footnoteref9_44x2m6u" title="Saraiva, 82." href="#footnote9_44x2m6u">9</a> Neither Lovin or Saraiva would be considered capitalist apologists (extremely far from it, in fact), but they recognize, just as Mises did, that the Nazis paid only lip service to property rights, while in reality, they established a command economy that fully fits Mises’s description of “socialism of the German pattern.”</p>
<ul class="footnotes"><li class="footnote" id="footnote1_7ye6w40"><a class="footnote-label" href="#footnoteref1_7ye6w40">1.</a> <em>Das Neue Tage-Buch, </em> I (Sept. 23, 1933), 303.</li>
<li class="footnote" id="footnote2_4egonnf"><a class="footnote-label" href="#footnoteref2_4egonnf">2.</a> <em>Der Deutsche Volkswirt, </em> VIII (Jan. 19, 1934), 676.</li>
<li class="footnote" id="footnote3_8q4f7qs"><a class="footnote-label" href="#footnoteref3_8q4f7qs">3.</a> Clifford R. Lovin, “Agricultural Reorganization in the Third Reich: The Reich Food Corporation (Reichsnährstand), 1933-1936,” <em>Agricultural History</em> 43, no. 4 (1969): 447–62.</li>
<li class="footnote" id="footnote4_mo7x7xa"><a class="footnote-label" href="#footnoteref4_mo7x7xa">4.</a> Henry Spiegel, “Land Inheritance under the Swastika,” <em>Agricultural History, </em>XIII (Oct. .1939), 176-188.</li>
<li class="footnote" id="footnote5_8ti4hmz"><a class="footnote-label" href="#footnoteref5_8ti4hmz">5.</a> Lovin, “Agricultural Reorganization in the Third Reich.”</li>
<li class="footnote" id="footnote6_5fyxk6c"><a class="footnote-label" href="#footnoteref6_5fyxk6c">6.</a> Lovin.</li>
<li class="footnote" id="footnote7_yihw1a2"><a class="footnote-label" href="#footnoteref7_yihw1a2">7.</a> Lovin.</li>
<li class="footnote" id="footnote8_wqk07gw"><a class="footnote-label" href="#footnoteref8_wqk07gw">8.</a> Tiago Saraiva, <em> Fascist Pigs: Technoscientific Organisms and the History of Fascism </em> (Cambridge, MA: The MIT Press, 2016), 86.</li>
<li class="footnote" id="footnote9_44x2m6u"><a class="footnote-label" href="#footnoteref9_44x2m6u">9.</a> Saraiva, 82.</li>
</ul>Chris Calton<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/nazis1.PNG?itok=YNNEdgt9" width="240" alt="nazis1.PNG" />44695November 19, 2018 - 11:00 AMFront page feedHayek's Case for Decentralized Communitieshttps://mises.org/node/44763
<p><i>This talk was delivered at the Abbeville Institute's conference on Secession and Nullification in Dallas, Texas on November 10, 2018.</i></p>
<p>My talk today is about decentralization and epistemology. At the outset I wish to disclaim any specialized expertise in this subject. I’m a lawyer by training who loves literature and earned a doctorate in English. It would be a stretch to call me a philosopher or a political theorist, hence this anchoring disclaimer to prevent me from sailing too deep into philosophical seas.</p>
<p>I have divided my argument, such as it is, into two parts: the impersonal and the personal. The former is a philosophical case for decentralization; the latter involves private considerations about intimate human relationships around which communities of common purpose organize and conduct themselves. In the end, the two approaches are mutually reinforcing, yielding, I hope, benevolent and humane considerations. Presenting them as separate, however, signals to different audiences whose tolerance for appeals to feeling may vary.</p>
<p><strong>The Impersonal</strong></p>
<p>The impersonal argument boils down to this: decentralized systems of order are more efficient, and hence more desirable, because they better account for and respond to dispersed knowledge across diverse communities with unique customs, ambitions, and values. Heterogeneous, bottom-up systems governed by local institutions that reflect native knowledge, talent, and choices more effectually serve humanity writ large than centralized, top-down systems that are unaccountable to local norms and mores.</p>
<p><em>Polycentric law</em>, or <em>polycentrism</em>,is the term I use to describe this organizational arrangement. Other names that suggest themselves fail to express the dynamism of polycentrism. Federalism, for example, confounds because of its association with the early American Federalists. It presupposes, moreover, even in its articulation by the inaptly named Anti-Federalists, too strong of a central authority, in my view, beneath which local authorities contend as coequal subordinates. Localism, for its part, suffers from associations with protectionist, anticompetitive economic policies. Other names such as confederation, city state, or anarcho-capitalism likewise have their drawbacks.</p>
<p>So I’m stuck with polycentrism as the operative label for the working system of small and plural authorities that I seek to describe. The chief value of this system is its propensity to temper and check the natural ambition and pride that lead humans not only to aspirations of power and greatness, but also to the coercive institutions and machinations that inhibit the voluntary organization of individuals around shared norms and customs. An optimal polycentric order consists of multiple, competing jurisdictions of humane and reasonable scale, each with their own divided powers that prevent the consolidation of authority in the form of a supreme ruler or tyrant (or, more likely in our age, of a managerial, administrative, and bureaucratic state) and each with a written document outlining governing rules and institutions while affirming a core commitment to common goals and a guiding mission. To speak of an optimal polycentric order, however, is problematic, because polycentric orders enable distinct communities to select and define for themselves the operative assemblage of rules and institutions that fulfills their chief ideals and favored principles.</p>
<p>F. A. Hayek’s price theory provides a useful starting point for discussing the benefits of bottom-up, decentralized modes of human ordering that represent polycentrism. This theory holds that knowledge is dispersed throughout society and incapable of being comprehensively understood by any one person or group of people; therefore, centralized economic planning inevitably fails because it cannot accurately assess or calculate the felt needs and coordinated activities of faraway people in disparate communities; only in a market economy where consumers freely buy and sell according to their unique preferences will reliable pricing gradually reveal itself.</p>
<p>Hayek’s theory of knowledge is predicated on the fallibility and limitations of human intelligence. Because the complexity of human behavior and interaction exceeds the capacity of one mind or group of minds fully to comprehend it, human coordination requires deference to emergent or spontaneous orders, rooted in custom, that adapt to the dynamic, evolving needs and preferences of everyday consumers. Hayek’s articulation of price theory contemplates collective and aggregated wisdom—i.e., disembodied or embedded knowledge—and cautions against grand designs based on the alleged expertise of a select class of people.</p>
<p>Michael Polanyi, another polymath and an ardent anti-Marxist, exposited related theories about polycentricity, spontaneous order, central planning, and knowledge, but he focused less on economic theory and more on scientific discovery, independent inquiry, and the free, systematic exchange of research and ideas. Scientific advancement, in his view, did not proceed as the construction of a house proceeds, namely according to a fixed plan or design, but rather by a process analogous to, in his words, "the ordered arrangement of living cells which constitute a polycellular organism."<a class="see-footnote" id="footnoteref1_mhiffht" title="Michael Polanyi, The Logic of Liberty (Indianapolis Liberty Fund, 1998) (1951), p. 109." href="#footnote1_mhiffht">1</a> "Throughout the process of embryonic development," he explained, “each cell pursues its own life, and yet each so adjusts its growth to that of its neighbors that a harmonious structure of the aggregate emerges."<a class="see-footnote" id="footnoteref2_usgseo6" title="Ibid." href="#footnote2_usgseo6">2</a> "This", he concluded, “is exactly how scientists co-operate: by continually adjusting their line of research to the results achieved up to date by their fellow-scientists."<a class="see-footnote" id="footnoteref3_7ets6em" title="Ibid." href="#footnote3_7ets6em">3</a></p>
<p>Polanyi labored to show that “the central planning of production” was “strictly impossible"<a class="see-footnote" id="footnoteref4_5yqr8o1" title="Ibid at 136." href="#footnote4_5yqr8o1">4</a> and that “the operations of a system of spontaneous order in society, such as the competitive order of a market, cannot be replaced by the establishment of a deliberate ordering agency.”<a class="see-footnote" id="footnoteref5_put3448" title="Ibid at 137." href="#footnote5_put3448">5</a> He described the inefficiencies of purely hierarchical organizational structures within which information rises upward from the base, mediated successively by subsequent, higher tiers of authority, arriving ultimately at the top of a pyramid, at some supreme authority, which then centrally directs the entire system, commanding orders down to the base. This convoluted process, besides being inefficient, is susceptible to disinformation and misinformation, and to a lack of reliable, on-the-ground knowledge of relevant circumstances. </p>
<p>While Polanyi points to mundane instances of spontaneous ordering, such as passengers at train stations, without central direction, standing on platforms and filling seats on the trains,<a class="see-footnote" id="footnoteref6_9aqtsyc" title="Ibid. at 141" href="#footnote6_9aqtsyc">6</a> he also examines more complex forms of behavioral adaptation to interpersonal interactions that, over time and through repetition, emerge as tacitly understood habits and rules that gain acceptance by the larger corporate body.</p>
<p>Centralization concentrates power in fewer people in smaller spaces, whereas decentralization divides and spreads power among vast networks of people across wider spaces. Under centralized government, good people who enjoy power may, in theory, quickly accomplish good, but evil people who enjoy power may quickly accomplish evil. Because of the inherent, apocryphal dangers of the latter possibility, centralized government must not be preferred. Our tendencies as humans are catastrophic, asserting themselves in the sinful behaviors we both choose and cannot help. There is, moreover, on a considerable range of issues, disagreement about what constitutes the bad and the good, the evil and the virtuous. If questions about badness or goodness, evil and virtuousness are simply or hastily resolved in favor of the central power, then resistant communities—threatened, marginalized, silenced, and coerced—will eventually exercise their political agency, mobilizing into insurrectionary alliances to undermine the central power. Centralized power therefore increases the probability of large-scale violence whereas decentralized government reduces conflicts to local levels where they tend to be minor and offsetting.</p>
<p>Polycentric orders produce self-constituting communities that regulate themselves through the mediating institutions they have voluntarily erected to align with their values, traditions, and priorities. Their practical scope and scale enable them to govern themselves according to binding rules that are generally agreeable to the majority within their jurisdiction.</p>
<p>A man alone in the wilderness is vulnerable to threats. When he enters into society, however, he combines with others who, with common interests, serve and protect each other from outside threats. If society grows large, materializing as vast states or governments, the people therein lose their sense of common purpose, their desire to unify for mutual benefit and protection. Factions and classes arise, each contending for power. The people in whom the sovereignty of the central power supposedly resides may become disempowered and marginalized as the network of bureaucratic functionaries proliferates. The people are displaced by arms and agencies of the central power. Although progress cannot be achieved without constructive competition among and between rival groups, societies cannot flourish when their inhabitants do not share a fundamental sense of common purpose and identity.</p>
<p>Centralized power may at first blush seem to be more efficient because its decision-making process is not complex, consisting as it does of top-down commands to subordinates. Theoretically, and only theoretically, ultimate efficiency could be achieved if all power were possessed by one person. But of course in reality no one person could protect his or her power from external threats or internal insubordination. In fact, the concentration of power in one person invites dissent and insurrection. It is easier, after all, to overthrow one person than to overthrow many. Therefore, in practice, centralized power requires the supreme authority to build bureaucracies of agents and functionaries loyally and dutifully to institute its top-down directive</p>
<p>But how does the central power generate a sense of loyalty and duty among and between these subordinates? Through patronage and political favors, pensions, rent seeking, influence peddling, immunities, cronyism, graft—in short, by strengthening the human urge for self-aggrandizement, elevating select people and groups to privileged positions at extraordinary expense to ordinary people or consumers. Accordingly, centralization as a form of human organization incentivizes corruption, malfeasance, and dishonesty while building convoluted networks of costly officials through whom information is mediated and distorted. The result is widespread corruption, misunderstanding, and inefficiency.</p>
<p>Even assuming <i>arguendo</i> that concentrated authority is more efficient, it would ease the ability to accomplish evil and mischief as well as good. The purported benefits of consolidated power presuppose a benevolent supreme authority with comprehensive knowledge of native circumstances. Whatever conceivable benefits may be obtained through hypothetically quick decision-making are outweighed by the potential harms resulting from the implementation of the decision as binding law. The limited and fallible knowledge on which the decision is based amplifies the resultant harm beyond what it might have been in a decentralized system that localized power and thereby diminished the capability of bad people to cause harm.</p>
<p>The efficiency, if any, of commanding orders and setting policy on a top-down model is therefore neutralized by the resulting inefficiencies and harmful consequences that could have been avoided had central planners not presupposed knowledge of local circumstances. Absent an offsetting authority, any centralized power may, without just cause, coerce and molest peaceful men and women in contravention of their distinct laws and customs. Naturally, these men and women, combined as resistant communities, will contest unwarranted, unwanted tyranny that threatens their way of life and understanding of community. Disturbance of social harmony and backlash against unjustified coercion render inefficient the allegedly efficient operations of the central power.</p>
<p>It becomes apparent, after long consideration, that centralized modes of power are not more efficient after all, that in fact they are inimical to liberty and virtue when compared to their decentralized alternatives. But that is not the only reason why the decentralized model is superior.</p>
<p><strong>The Personal</strong></p>
<p>You don’t enjoy fine wine merely by talking and thinking about it, but by actually drinking it, sniffing its aromas, swirling it in your glass, wetting your tongue and coating your mouth with it. A true appreciation of wine is experiential, based on the repeated pleasure of tasting and consuming different grape varieties with their distinctive flavor components. Most people develop their loves and priorities this way. They do not love abstractions, but they love their neighbors, families, and friends. They prioritize issues that are to them near and daily. They have done so from an early age. “It is within families and other institutional arrangements characteristic of neighborhood, village, and community life that citizenship is learned and practiced for most people most of the time,” said Vincent Ostrom.<a class="see-footnote" id="footnoteref7_yd9uird" title="Vincent Ostrom, The Meaning of Democracy and the Vulnerability of Democracies (Ann Arbor: The University of Michigan Press, 1997), p. x." href="#footnote7_yd9uird">7</a> “The first order of priority in learning the craft of citizenship as applied to public affairs,” he added, “needs to focus on how to cope with problems in the context of family, neighborhood, village, and community. This is where people acquire the rudiments for becoming self-governing, by learning how to live and work with others.”<a class="see-footnote" id="footnoteref8_dxq9k8p" title="Ibid." href="#footnote8_dxq9k8p">8</a></p>
<p>I learned to accept defeat, not from national election campaigns, foreign wars, or too-big-to-fail banks that nevertheless failed, but from little-league baseball, when my third-grade team, the Cardinals, lost in the semifinals, and when my freshman basketball team lost in the finals. I still dream about that championship basketball game. My coach had put me in the game for the sole purpose of shooting three-pointers, my specialty, but the defense double-teamed me. I was unable to get a clear shot. Every time I passed the ball away my coach yelled “no,” commanding me to shoot. Earlier in the season, before he knew my skill behind the three-point line, he shouted “no” whenever I took a shot.</p>
<p>I learned about injustice when my first-grade teacher punished me in a manner that was disproportionate to my alleged offense, which to this day I deny having committed, and about grace and mercy when my mother forgave me, without so much as a spank, for an offense that I had most definitely committed.</p>
<p>I learned about God and faith while having breakfast at my grandmother’s kitchen table. She kept a Bible on the table beside a bookshelf full of texts on Christian themes and teachings. At the middle of the table was a little jar of Bible verses. I recall reaching my hand into the jar and pulling out verses, one after another, weekend after weekend, reading them to her and then discussing with her what their meaning might be. This mode of learning was intimate and hands-on and prepared me to experience God for myself, to study His word and figure out my beliefs about Him when later I retired to places of solitude for silent contemplation. These experiences meant far more to me than the words of any faraway televangelist.</p>
<p>Whenever I stayed at my grandparents’ house, my grandfather would awaken early and start the coffee pot. My brother and I, hearing him downstairs, would rush to his side. He shared sections of the newspaper with us and allowed us to drink coffee with him. He made us feel like responsible adults, two little children with newspaper and coffee in hand, pondering current events and passing judgment on the latest political trends and scandals. This indispensable education did not come from public broadcasting or from some expensive civic literacy project orchestrated by the National Foundation for the Arts or the National Foundation for the Humanities. It came from family, in familiar spaces, in the warmth of a loving home.</p>
<p>Mrs. Stubbs taught me manners and decorum at cotillion, although she never succeeded in teaching me to dance. I learned etiquette on the golf course where I spent my childhood summers playing with groups of grown men, competing with them while learning how to ask questions about their careers and professions, staying silent as they swung or putted, not walking in their lines, holding the flagstick for them, giving them honors on the tee when they earned the lowest score on the previous hole, raking the bunkers, walking carefully to avoid leaving spike marks on the greens, fixing my ball marks, and so on.</p>
<p>I learned about death when a girl I carpooled with to church passed away from cancer. She was only four or five when she died. Then there was the death of my great-grandmother, then my great-grandfather, then my grandfather, and so on down the line, which to this day approaches me. In the South we still open our caskets to display corpses and remind ourselves of the fragility of life and the inevitability of death. This solemn ritual keeps us mindful of our purpose in life, draws us closer to our friends and family, and ensures that we contemplate the gravest and most important questions.</p>
<p>My two grandfathers meant the world to me. Both of them wore suits and ties to work every day. They dressed professionally and responsibly for every occasion. I copied them at an early age. In high school, while the other kids gave themselves over to the latest fads and fashions, I wore button-down shirts tucked neatly into slacks. I thought I wouldn’t score points with my peers by dressing up for class, but before long many of my friends adopted the practice as we began to think of ourselves as little men in pursuit of an education. Because we were athletes, our clothing was not just tolerated but eventually mimicked. When the other basketball teams showed up at our gym, we met them in coat and tie while they wore t-shirts that were too big and breakaway pants that sagged beneath their rear ends. Our team might have startled them by our formal attire. But we startled them even more after we removed to the locker room, put on our jerseys, stormed the court and then beat the living hell out of them.</p>
<p>I could go on. The point is that felt experience defines who we are and shapes how we behave. As Justice Holmes remarked, “What we most love and revere generally is determined by early associations. I love granite rocks and barberry bushes, no doubt because with them were my earliest joys that reach back through the past eternity of my life.”<a class="see-footnote" id="footnoteref9_hlfx81o" title="Oliver Wenell Holmes Jr. "Natural Law." Harvard Law Review, Vol. 32 (1918-19), p. 41." href="#footnote9_hlfx81o">9</a> What he says next is more important:</p>
<blockquote><p>But while one’s experience thus makes certain preferences dogmatic for oneself, recognition of how they came to be so leaves one able to see that others, poor souls, may be equally dogmatic about something else. And this again means skepticism. Not that one’s belief or love does not remain. Not that we would not fight and die for it if important—we all, whether we know it or not, are fighting to make the kind of a world that we should like—but that we have learned to recognize that others will fight and die to make a different world, with equal sincerity or belief. Deep-seated preferences can not be argued about—you can not argue a man into liking a glass of beer—and therefore, when differences are sufficiently far reaching, we try to kill the other man rather than let him have his way. But that is perfectly consistent with admitting that, so far as appears, his grounds are just as good as ours.<a class="see-footnote" id="footnoteref10_1smzt4j" title="Holmes at 41." href="#footnote10_1smzt4j">10</a></p></blockquote>
<p>I take these words as cautionary—as a stark reminder of the horrifying potential for violence that inheres in the attempt of one group of people formed by certain associations to impose by force their norms and practices on another group of people formed by different associations. It is the distinct virtue of polycentricity to accommodate these differences and to minimize the chances of violence by diffusing and dispersing power.</p>
<p><strong>Conclusion</strong></p>
<p>The polycentric order I advocate is not utopian; it’s concrete and practical and exemplified by the mediating institutions and subsidiary authorities such as churches, synagogues, clubs, little leagues, community associations, schools, and professional memberships through and with which we express ourselves, politically or otherwise, and to whose rules we voluntarily submit. </p>
<p>When we turn on our televisions in the evening, we are, many of us from this part of the country, disturbed by the increase of lewd conduct, divisive rhetoric, mischievous behavior, and institutionalized decadence that are contrary to our local norms yet systemically and vigorously forced upon us by foreign or outside powers. Turning off the television in protest seems like our only mode of resistance, our only manner of dissent. Disgusted by mounting evidence that our politicians have marshaled the apparatus of the mighty federal government to achieve personal fame and glory, many of us feel exploited and powerless. In the face of massive state bureaucracies, large corporations, biased media, tendentious journalists, and commanding militaries, we nevertheless exercise our agency, bringing joy and hope to our families, friends, and neighbors, tending to concrete circumstances that are under our direct control. The promise of community reinvigorates and refreshes us.</p>
<p>Recently I strolled around Copenhagen, Denmark, on a bright Sunday morning. Though the church bells rang through the streets, echoing off buildings and cobblestone sidewalks, silencing conversations, and startling some pigeons, the churches themselves remained empty. I saw no worshipers or worship services. Some of the churches had been repurposed as cafes and restaurants with waiters and waitresses but no pastors or priests; customers drank their wine and ate their bread at fine little tables, but there were no communion rituals or sacraments.</p>
<p>A month later, also on a Sunday, I flew into Montgomery, Alabama, from Dallas, Texas. As the plane slowly descended beneath the clouds, the little dollhouse figurines and model buildings beneath me snapped to life, becoming real people and structures. I gazed upon the dozens of churches dotting the flat, widening landscape, which grew nearer and bigger as we approached the airport. And I observed, sitting there, stock still yet propelled through space, that the parking lots of each church were full of cars, that there were, at this early hour, hundreds if not thousands of my people there before me, worshipping the same God I worshipped, the same God my parents and grandparents and their parents and grandparents had worshipped; and I sensed, right then, deeply and profoundly, for the first time in years, a rare but unmistakable feeling: hope not just for <em>my</em> community, but for <em>community</em>.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_mhiffht"><a class="footnote-label" href="#footnoteref1_mhiffht">1.</a> Michael Polanyi, <em>The Logic of Liberty</em> (Indianapolis Liberty Fund, 1998) (1951), p. 109.</li>
<li class="footnote" id="footnote2_usgseo6"><a class="footnote-label" href="#footnoteref2_usgseo6">2.</a> Ibid.</li>
<li class="footnote" id="footnote3_7ets6em"><a class="footnote-label" href="#footnoteref3_7ets6em">3.</a> Ibid.</li>
<li class="footnote" id="footnote4_5yqr8o1"><a class="footnote-label" href="#footnoteref4_5yqr8o1">4.</a> Ibid at 136.</li>
<li class="footnote" id="footnote5_put3448"><a class="footnote-label" href="#footnoteref5_put3448">5.</a> Ibid at 137.</li>
<li class="footnote" id="footnote6_9aqtsyc"><a class="footnote-label" href="#footnoteref6_9aqtsyc">6.</a> Ibid. at 141</li>
<li class="footnote" id="footnote7_yd9uird"><a class="footnote-label" href="#footnoteref7_yd9uird">7.</a> Vincent Ostrom, <em>The Meaning of Democracy and the Vulnerability of Democracies</em> (Ann Arbor: The University of Michigan Press, 1997), p. x.</li>
<li class="footnote" id="footnote8_dxq9k8p"><a class="footnote-label" href="#footnoteref8_dxq9k8p">8.</a> Ibid.</li>
<li class="footnote" id="footnote9_hlfx81o"><a class="footnote-label" href="#footnoteref9_hlfx81o">9.</a> Oliver Wenell Holmes Jr. "Natural Law." <em>Harvard Law Review</em>, Vol. 32 (1918-19), p. 41.</li>
<li class="footnote" id="footnote10_1smzt4j"><a class="footnote-label" href="#footnoteref10_1smzt4j">10.</a> Holmes at 41.</li>
</ul>Allen Mendenhall<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/GettyImages-920381302.jpg?itok=yZXxI9tu" width="240" alt="GettyImages-920381302.jpg" />44763November 18, 2018 - 6:45 PMFront page feedInnovation Requires Economic Freedomhttps://mises.org/node/5903
<p>[Excerpted from chapter 16 of <a href="http://mises.org/resources/118/Theory-and-History-An-Interpretation-of-Social-and-Economic-Evolution"><em>Theory and History</em></a> (1957).]</p>
<p>A civilization is the product of a definite worldview, and its philosophy manifests itself in each of its accomplishments. The artifacts produced by men may be called material. But the methods resorted to in the arrangement of production activities are mental, the outcome of ideas that determine what should be done and how. All the branches of a civilization are animated by the spirit that permeates its ideology.</p>
<p>The philosophy that is the characteristic mark of the West and whose consistent elaboration has in the last centuries transformed all social institutions has been called individualism. It maintains that ideas, the good ones as well as the bad, originate in the mind of an individual man. Only a few men are endowed with the capacity to conceive new ideas.</p>
<p>But as political ideas can work only if they are accepted by society, it rests with the crowd of those who themselves are unable to develop new ways of thinking to approve or disapprove the innovations of the pioneers. There is no guarantee that these masses of followers and routinists will make wise use of the power vested in them. They may reject the good ideas, those whose adoption would benefit them, and espouse bad ideas that will seriously hurt them.</p>
<p>But if they choose what is worse, the fault is not theirs alone. It is no less the fault of the pioneers of the good causes in not having succeeded in bringing forward their thoughts in a more convincing form. The favorable evolution of human affairs depends ultimately on the ability of the human race to beget not only authors but also heralds and disseminators of beneficial ideas.</p>
<p>One may lament the fact that the fate of mankind is determined by the — certainly not infallible — minds of men. But such regret cannot change reality. In fact, the eminence of man is to be seen in his power to choose between good and evil. It is precisely this that the theologians had in view when they praised God for having bestowed upon man the discretion to make his choice between virtue and vice.</p>
<p>The dangers inherent in the masses' incompetence are not eliminated by transferring the authority to make ultimate decisions to the dictatorship of one or a few men, however excellent. It is an illusion to expect that despotism will always side with the good causes. It is characteristic of despotism that it tries to curb the endeavors of pioneers to improve the lot of their fellow men.</p>
<p>The foremost aim of despotic government is to prevent any innovations that could endanger its own supremacy. Its very nature pushes it toward extreme conservatism, the tendency to retain what is, no matter how desirable for the welfare of the people a change might be. It is opposed to new ideas and to any spontaneity on the part of the subjects.</p>
<p>In the long run even the most despotic governments with all their brutality and cruelty are no match for ideas. Eventually the ideology that has won the support of the majority will prevail and cut the ground from under the tyrant's feet. Then the oppressed many will rise in rebellion and overthrow their masters.</p>
<p>However, this may be slow to come about, and in the meantime irreparable damage may have been inflicted upon the common weal. In addition, a revolution necessarily means a violent disturbance of social cooperation, produces irreconcilable rifts and hatreds among the citizens, and may engender bitterness that even centuries cannot entirely wipe out. The main excellence and worth of what is called constitutional institutions, democracy, and government by the people is to be seen in the fact that they make possible peaceful change in the methods and personnel of government.</p>
<p>Where there is representative government, no revolutions and civil wars are required to remove an unpopular ruler and his system. If the men in office and their methods of conducting public affairs no longer please the majority of the nation, they are replaced in the next election by other men and another system.</p>
<p>In this way the philosophy of individualism demolished the doctrine of absolutism, which ascribed heavenly dispensation to princes and tyrants. To the alleged divine right of the anointed kings it opposed the inalienable rights bestowed upon man by his creator. As against the claim of the state to enforce orthodoxy and to exterminate what it considered heresy, it proclaimed freedom of conscience. Against the unyielding preservation of old institutions become obnoxious with the passing of time, it appealed to reason. Thus it inaugurated an age of freedom and progress toward prosperity.</p>
<p>It did not occur to the liberal philosophers of the 18th and early 19th centuries that a new ideology would arise which would resolutely reject all the principles of liberty and individualism and would proclaim the total subjection of the individual to the tutelage of a paternal authority as the most desirable goal of political action, the most noble end of history, and the consummation of all the plans God had in view in creating man.</p>
<p>Not only Hume, Condorcet, and Bentham but even Hegel and John Stuart Mill would have refused to believe it if some of their contemporaries had prophesied that in the 20th century most of the writers and scientists of France and the Anglo-Saxon nations would wax enthusiastic about a system of government that eclipses all tyrannies of the past in pitiless persecution of dissenters and in endeavors to deprive the individual of all opportunity for spontaneous activity. They would have considered that man a lunatic who told them that the abolition of freedom, of all civil rights, and of government based on the consent of the governed would be called liberation. Yet all this has happened.</p>
<p>The historian may understand and give thymological explanations for this radical and sudden change in ideology. But such an interpretation in no way disproves the philosophers' and the economists' analysis and critique of the counterfeit doctrines that engendered this movement.</p>
<p>The keystone of Western civilization is the sphere of spontaneous action it secures to the individual. There have always been attempts to curb the individual's initiative, but the power of the persecutors and inquisitors has not been absolute. It could not prevent the rise of Greek philosophy and its Roman offshoot or the development of modern science and philosophy.</p>
<p>Driven by their inborn genius, pioneers have accomplished their work in spite of all hostility and opposition. The innovator did not have to wait for invitation or order from anybody. He could step forward of his own accord and defy traditional teachings. In the orbit of ideas, the West has by and large always enjoyed the blessings of freedom.</p>
<p>Then came the emancipation of the individual in the field of business, an achievement of that new branch of philosophy, economics. A free hand was given to the enterprising man who knew how to enrich his fellows by improving the methods of production. A horn of plenty was poured upon the common men by the capitalistic business principle of mass production for the satisfaction of the needs of the masses.</p>
<p>In order to appraise justly the effects of the Western idea of freedom we must contrast the West with conditions prevailing in those parts of the world that have never grasped the meaning of freedom.</p>
<p>Some Oriental peoples developed philosophy and science long before the ancestors of the representatives of modern Western civilization emerged from primitive barbarism. There are good reasons to assume that Greek astronomy and mathematics got their first impulse from acquaintance with what had been accomplished in the East.</p>
<p>When later the Arabs acquired a knowledge of Greek literature from the nations they had conquered, a remarkable Muslim culture began to flourish in Persia, Mesopotamia, and Spain. Up to the 13th century Arabian learning was not inferior to the contemporary achievements of the West. But then religious orthodoxy enforced unswerving conformity and put an end to all intellectual activity and independent thinking in the Muslim countries, as had happened before in China, in India, and in the orbit of Eastern Christianity.</p>
<p>The forces of orthodoxy and persecution of dissenters, on the other hand, could not silence the voices of Western science and philosophy, for the spirit of freedom and individualism was already strong enough in the West to survive all persecutions. From the 13th century on, all intellectual, political, and economic innovations originated in the West. Until the East, a few decades ago, was fructified by contact with the West, history in recording the great names in philosophy, science, literature, technology, government, and business could hardly mention any Orientals.</p>
<p>There was stagnation and rigid conservatism in the East until Western ideas began to filter in. To the Orientals themselves slavery, serfdom, untouchability, customs like <a href="http://en.wikipedia.org/wiki/Sati_(practice)">sutteeism</a> or the crippling of the feet of girls, barbaric punishments, mass misery, ignorance, superstition, and disregard of hygiene did not give any offense. Unable to grasp the meaning of freedom and individualism, today they are enraptured with the program of collectivism.</p>
<p>Although these facts are well-known, millions today enthusiastically support policies that aim at the substitution of planning by an authority for autonomous planning by each individual. They are longing for slavery.</p>
<p>Of course, the champions of totalitarianism protest that what they want to abolish is "only economic freedom" and that all "other freedoms" will remain untouched. But freedom is indivisible. The distinction between an economic sphere of human life and activity and a noneconomic sphere is the worst of their fallacies. If an omnipotent authority has the power to assign to every individual the tasks he has to perform, nothing that can be called freedom and autonomy is left to him. He has only the choice between strict obedience and death by starvation.</p>
<p>Committees of experts may be called to advise the planning authority whether or not a young man should be given the opportunity to prepare himself for and to work in an intellectual or artistic field. But such an arrangement can merely rear disciples committed to the parrot-like repetition of the ideas of the preceding generation.</p>
<p>It would bar innovators who disagree with the accepted ways of thought. No innovation would ever have been accomplished if its originator had been in need of an authorization by those from whose doctrines and methods he wanted to deviate. <a href="http://en.wikipedia.org/wiki/Hegel">Hegel</a> would not have ordained <a href="http://en.wikipedia.org/wiki/Schopenhauer">Schopenhauer</a> or <a href="http://en.wikipedia.org/wiki/Ludwig_Feuerbach">Feuerbach</a>, nor would <a href="http://en.wikipedia.org/wiki/Karl_Heinrich_Rau">Professor Rau</a> have ordained <a href="http://wiki.mises.org/wiki/Karl_Marx">Marx</a> or <a href="http://wiki.mises.org/wiki/Carl_Menger">Carl Menger</a>.</p>
<p>If the supreme planning board is ultimately to determine which books are to be printed, who is to experiment in the laboratories and who is to paint or to sculpture, and which alterations in technological methods should be undertaken, there will be neither improvement nor progress. Individual man will become a pawn in the hands of the rulers, who in their "social engineering" will handle him as engineers handle the stuff of which they construct buildings, bridges, and machines.</p>
<p>In every sphere of human activity an innovation is a challenge not only to all routinists and to the experts and practitioners of traditional methods but even more to those who have in the past themselves been innovators. It meets at the beginning chiefly stubborn opposition. Such obstacles can be overcome in a society where there is economic freedom. They are insurmountable in a socialist system.</p>
<p>The essence of an individual's freedom is the opportunity to deviate from traditional ways of thinking and of doing things. Planning by an established authority precludes planning on the part of individuals.</p>
Ludwig von Mises<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/4786.jpg?itok=yQVd5g1V" width="240" alt="4786.jpg" />5903November 17, 2018 - 2:00 PMFront page feedCapitalism Means Less Waste — Because More Waste Means Less Profithttps://mises.org/node/44685
<p>In “<a href="https://mises.org/print/44600">How Capitalists Created a “War on Waste</a>”,” Chris Calton did an excellent job of laying out how the “profit motive encourages the natural reduction of waste,” without requiring government coercion. Selling part of the output of a productive process that would otherwise be thrown away or require costly disposal is as much a source of profit as any other way of increasing revenue or decreasing costs. Further, he illustrated the power of those positive environmental incentives with multiple striking examples. In other words, he taught readers something important.</p>
<p>However, Mr. Calton’s article raises a question — why aren’t students who have taken economics courses already intimately familiar with this topic? It appears to be a natural application of market entrepreneurship and the analysis of production processes that produce multiple outputs — joint products, or productive complements.</p>
<p>I believe the core reason is that the topic of productive complements is too-seldom taught in principles of microeconomics or intermediate microeconomics texts.</p>
<p>Every economics student is shown how “both-and” relationships exist on the demand side (e.g., coffee and donuts), and how an increase in the price of the “other” goods in such bundles will decrease the demand for their complements. However, students are much less often shown how “both-and” relationships exist on the production or supply side (e.g., beef and hides as joint outputs from raising cattle) and how an increase in the price of the “other” goods in such bundles will increase the supply of their productive complements.</p>
<p>For an article titled “<a href="https://ssrn.com/abstract=2364883">Productive Complements: Too Often Neglected in the Principles Course</a>?”, my co-authors and I surveyed a set of economics principles texts to see how many introduced productive complements. We found four major texts that incorporated the subject, but eighteen that did not. We even went back to the first edition of Paul Samuelson’s Principles of Economics book and found that he did not discuss it either. We also extended our survey to a smaller set of intermediate microeconomics texts, none of which discussed the topic.</p>
<p>Without being taught that productive complements are important supply shifters in supply and demand analysis, students do not learn to look in that analytical direction. And not knowing to look often means not recognizing even obvious and important application of the analysis--such as the inherent market incentive to reduce waste. And this not only blinds students to important applications, it represents a substantial dumbing-down of what economics students must learn.</p>
<p>Almost a century ago, in his 1920 <a href="https://eet.pixel-online.org/files/etranslation/original/Marshall,%20Principles%20of%20Economics.pdf"> text</a>, Alfred Marshall not only talked about “the case of joint products: i.e., of things which cannot easily produced separately; but are joined in a common origin, and may therefore be said to have a joint supply,” he provided several examples. He analyzed applications involving not just beef and hides, but wheat and wheat straw, wool and mutton, and cotton and cotton-seed oil. He even derived a rule for the supply price of a productive complement in competitive markets.</p>
<p>Even earlier, <a href="https://www.econlib.org/library/YPDBooks/Jevons/jvnPE.html"> William Stanley Jevons </a> argued in 1871 that “these cases of joint production, far from being 'some peculiar cases,' form the general rule, to which it is difficult to point out any clear of important exceptions.” And it is hard to disagree when we ask how many production processes have only one potentially valuable output and generate nothing that needs to be disposed of or generates negative externalities, such as pollution of one form or another.</p>
<p>We live in a world where claims of “market failure” are seemingly ubiquitous (though not developed to the point of showing that mechanisms relying on government coercive power would in fact do better). However, people seem far less aware of how profit incentives push producers to reduce costs and damage, even if we might caricature them as “not caring about others,” because they do care about their bottom lines. However, students who have been exposed to economics should know this. And for that, they need to learn more about productive complements. That would not only remove their blinders about a cornucopia of interesting and useful entrepreneurial applications, it would also expand their horizons to free market environmentalism and deflate one of the more common defamations that can keep people from fairly considering the advantages of voluntary arrangements over government coercion.</p>
Gary Galles<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/waste1.PNG?itok=VWnX4esE" width="240" alt="waste1.PNG" />44685November 17, 2018 - 11:00 AMFront page feedDoes China Have Enough Gold to Move Toward Hard Currency?https://mises.org/node/44708
<h4>Are the Chinese Keynesian?</h4>
<p>We can be reasonably certain that Chinese government officials approaching middle age have been heavily westernised through their education. Nowhere is this likely to matter more than in the fields of finance and economics. In these disciplines there is perhaps a division between them and the old guard, exemplified and fronted by President Xi. The grey-beards who guide the National Peoples Congress are aging, and the brightest and best of their successors understand economic analysis differently, having been tutored in Western universities.</p>
<p>It has not yet been a noticeable problem in the current, relatively stable economic and financial environment. Quiet evolution is rarely disruptive of the status quo, and so long as it reflects the changes in society generally, the machinery of government will chug on. But when (it is never “if”) the next global credit crisis develops, China’s ability to handle it could be badly compromised.</p>
<p>This article thinks through the next credit crisis from China’s point of view. Given early signals from the state of the credit cycle in America and from growing instability in global financial markets, the timing could be suddenly relevant. China must embrace sound money as her escape route from a disintegrating global fiat-money system, but to do so she will have to discard the neo-Keynesian economics of the West, which she has adopted as the mainspring of her own economic advancement.</p>
<p>With Western-educated economists imbedded in China’s administration, has China retained the collective nous to understand the flaws, limitations and dangers of the West’s fiat money system? Can she build on the benefits of the sound-money approach which led her to accumulate gold, and to encourage her citizens to do so as well?</p>
<p>China’s economic advisors will have to display the courage to drop the misguided economic policies and faux statistics by which she will continue to be judged by her Western peers. If she faces up to the challenge, China should emerge from the next credit crisis in a significantly stronger position than the West, for which such a radical change in economic thinking undertaken willingly is impossible to imagine.</p>
<h4>Post-Mao Financial and Monetary Strategy</h4>
<p>Following Mao Zedong’s death in 1976, the Chinese leadership faced a primal decision over her destiny. With Mao’s demise, the icon that forcibly united over forty ethnic groups was gone. It was the end of an era of Chinese history, and she had to embrace the future with a new approach. Failure to do so risked the fragmentation of the state through civil disobedience and would probably have ended in a multi-ethnic civil war.</p>
<p>Wise heads, which had observed the remarkable successes of Hong Kong and Singapore being driven by Chinese diasporas, prevailed. It was clear that in order to survive, the Communist Party would have to embrace capitalism while retaining political control. Mao’s nominated successor, Hua Gofeng, lasted no more than a year, being promoted upstairs out of harm’s way. It was his successor, Deng Xiaoping, who reinvented China. In the late-1970s, Deng, hating the Soviets for their involvement in Vietnam, reaffirmed the USSR as China’s main adversary. At this crucial point in China’s pupation she secured a strategic relationship with America by sharing a common enemy.</p>
<p>The seeds for the relationship with America had already been sown by Nixon’s first visit to China in 1972, so the Americans were prepared to help ease China into their world. Through the 1980s, the relationship opened China up to inward investment by American and other Western corporations, and there was a rush to establish new factories, taking advantage of a cheap diligent labour force and the lack of restrictive regulations and planning laws.</p>
<p>By 1983 it was clear that China’s central bank, the Peoples Bank (PBOC), had a growing currency problem on its hands, because it bought all the foreign exchange against which it issued yuan for domestic circulation. Inward capital flows were added to by the policy of managing the yuan exchange rate lower in order to stimulate economic development. Accordingly, as well as foreign currency management the PBOC was tasked with the sole responsibility of the state’s gold and silver purchases as a policy offset.<a class="see-footnote" id="footnoteref1_y5dmdk9" title="Regulations on the Control of Gold and Silver (Promulgated June 15, 1983 by the State Council)" href="#footnote1_y5dmdk9">1</a> The public was still banned from owning both metals.</p>
<p>In those days, China’s gold objective was simply to diversify her reserves. The leadership grasped the difference between gold and fiat money, just as the Arabs had in the 1970s, and the Germans had in the 1950s. It was prudent to hold some physical gold. Furthermore, Marxist economic theory taught in the state universities impressed on students that western capitalism was certain to fail, and that being the case, their fiat currencies would become worthless as well.</p>
<p>China’s secret accumulation of gold in the 1980s was also an insurance against future economic instability, which is why it was spread round the institutions that were fundamental to the state, such as the Peoples Liberation Army, the Communist Party and the Communist Youth League. Only a relatively small portion was declared as monetary reserves.</p>
<p>In the 1990s, inward capital flows were beginning to be supplemented by exports, and a new wealthy Chinese class was emerging. The PBOC still had an embarrassment of dollars. Fortunately, gold was unloved in Western markets, and bullion was readily available at declining prices. The PBOC was able to accumulate gold secretly on behalf of the state’s institutions in large quantities. But there was a new strategic reason emerging for buying gold, following the collapse of the USSR.</p>
<p>The end of the USSR in 1989 meant it was no longer America’s and China’s common enemy, altering the strategic relationship between the two. This led to a gradual change in China’s foreign relationships, with America becoming increasingly concerned at China’s emergence as a super-power, threatening her own global dominance.</p>
<p>These shifting relationships changed China’s gold policy from one where gold acted as a sort of general insurance policy against monetary unknowns, to its accumulation as a strategic asset.</p>
<p>Bullion was freely available, partly because Western central banks were selling it in a falling market. The notorious sale of the bulk of Britain’s gold by Gordon Brown at the bottom of the market was the public face of Western central banks’ general disaffection with gold. China was on the other side of the deal. Between 1983 and 2002, mine supply added 42,460 tonnes to above-ground stocks, when the West were net sellers.</p>
<p>The evidence of China’s all-out gold policy is plain to see. She invested heavily in gold mining and is now the largest national miner of gold by far. Chinese government refiners were also importing gold and silver doré to process and keep, and they set a new four-nines standard for one kilo bars. Today, China has a tightening grip on the entire global bullion market.</p>
<p>A decision was taken in 2002 by China to allow the public to buy gold, and the benefits of ownership were widely promoted by state media. We can be certain this decision was taken only after the State had accumulated sufficient bullion for its supposed needs.</p>
<p>China’s public has accumulated approximately 15,000 tonnes to date, net of scrap recycling, based on deliveries out of the Shanghai Gold Exchange’s vaults. Given the public is still banned from owning foreign currency, gold ownership should continue to be popular as an alternative store of value to the yuan, and currently between 150-200 tonnes are being delivered from SGE vaults every month.</p>
<p>Other than declared reserves, it is not known how much gold the state owns. But assessing capital flows from 1983 and allowing for the availability of physical bullion through mining supply and the impact of the 1980-2002 bear market, the PBOC could have accumulated as much as 15,000-20,000 tonnes before the public were permitted to buy gold. If so, it would represent approximately 10% of those capital flows at contemporary gold prices.</p>
<p>The truth is unknown, but we can be sure gold has become a strategic asset for China and its people. China must have always had an expectation that in the long-term gold will become money again, presumably as backing for the yuan. Otherwise, why go to such lengths to monopolize the global bullion market?</p>
<p>But there is a problem. As time goes on and a newer, western-educated generation of leaders emerges, will they still fully recognize the value of gold beyond being simply a strategic asset, and will they recognize the real reasons behind the West’s economic failures, given they have successfully embraced its economic and monetary policies?</p>
<p>Were the Chinese to take a turn toward hard-money policies, it is hard to see how the US could match a sound-money plan from China. Furthermore, the US Government’s finances are already in very poor shape and a return to sound money would require a reduction in government spending that all observers can agree is politically impossible. This is not a problem the Chinese government faces.</p>
<p>Whether China implements such a plan, one thing is for sure: the next credit crisis will happen, and it will have a major impact on all nations operating with fiat money systems. The interest rate question, because of the mountains of debt owed by governments and consumers, will have to be addressed, with nearly all Western economies irretrievably ensnared in a debt trap. The hurdles faced in moving to a sound monetary policy appear to be simply too daunting to be addressed.</p>
<p>Ultimately, a return to sound money is a solution that will do less damage than fiat currencies losing their purchasing power at an accelerating pace. Think Venezuela, and how sound money would solve her problems. But that path is blocked by a sink-hole that threatens to swallow up whole governments. Trying to buy time by throwing yet more money at an economy suffering a credit crisis will only destroy the currency. The tactic worked during the Lehman crisis, but it was a close-run thing. It is unlikely to work again.</p>
<p>[<em>Adapted and shortened from <a href="https://www.goldmoney.com/research/goldmoney-insights/china-s-monetary-policy-must-change">the original</a></em>.]</p>
<ul class="footnotes"><li class="footnote" id="footnote1_y5dmdk9"><a class="footnote-label" href="#footnoteref1_y5dmdk9">1.</a> <em>Regulations on the Control of Gold and Silver </em>(Promulgated June 15, 1983 by the State Council)</li>
</ul>Alasdair Macleod<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/yuangold1.PNG?itok=5rJX1m5M" width="240" alt="yuangold1.PNG" />44708November 17, 2018 - 6:00 AMFront page feedA White House Press Pass Has Nothing to do with the First Amendmenthttps://mises.org/node/44762
<p>A federal judge today ruled the White House must temporarily re-instate the press pass of CNN reporter Jim Acosta's, who had been barred after an argument with Donald Trump in the press room. The judge ruled the White House had violated due process by banning Acosta.</p>
<p>CNN, however, had requested a ruling saying that Acosta more or less had a<em> constitutional right</em> to a press pass, and that the First Amendment guaranteed CNN and its reporters access to the White House press conference room.</p>
<p>Judge Timothy Kelly disagreed. According to the <em>Washington Post:</em></p>
<blockquote><p>In explaining his decision, Kelly said he agreed with the government’s argument that there was no First Amendment right to come onto the White House grounds. But, he said, once the White House opened up the grounds to reporters, the First Amendment applied.</p></blockquote>
<p>On the due process issue, Kelly is mostly right on this one. But Kelly gets it wrong when he says that the First Amendment potentially applies wherever the White House has opened up access to reporters overall.</p>
<h4>How Can Press Room Access be a "Right" If Only Allowed to a Privileged Few?</h4>
<p>It's difficult to see, though, how something so limited and so unavailable to nearly everyone could be called a right. After all, not even all <em>reporters </em>can hope to secure a White House press pass. And non-reporters have even less chance of ever getting access. Access to White House media facilities and forums are a privilege reserved for a select few —and most of those few are wealthy operatives of extremely powerful media corporations.</p>
<p>A press pass is clearly not a right in the same sense as a trial by jury, a right to be secure in one's personal property, or a right to peaceably assemble. In theory at least, those rights apply to <em>everyone</em> unless voluntarily waived, or unless revoked through some sort of public due process.</p>
<p>Nor is it the case that just <em>anyone</em> who is recognized as a journalist gets access to the White House press room. The room, of course, is of a finite size — there are 49 seats — and access is limited. Only a select group of people is allowed in, and the credentialing process is controlled in part by the White House Correspondents' Association which hardly hands out credentials as if they were a human right.</p>
<p>Thus, if the First Amendment guarantees access to the White House press room, how is it that the overwhelming majority of journalists in the country can never hope to <em>enjoy</em> this right?</p>
<p>Moreover, government judges and officials <a href="http://articles.latimes.com/2005/mar/27/entertainment/ca-shaw27">have refused to rule with finality on the idea that <em>anyone</em> can be a journalist. </a>This leaves open the opportunity for governments themselves to define who gets to be a journalist and who doesn't. Not surprisingly, US Senator Dianne Feinstein <a href="https://www.watchdog.org/national/feinstein-wants-to-limit-who-can-be-a-journalist/article_e4cd1068-9c60-55ab-9266-6a55a3ce8a28.html">has suggested</a> that only paid, professional journalists ought to be considered "real" journalists.</p>
<p>If access to the White House is to rise to the level of a right, though, it certainly can't be reliant on the whims of Senators and judges as to who gets to exercise that right. Nor could the White House Correspondents' Association, or any other group, be allowed to limit this right to a few influential reporters.</p>
<p>If CNN is going to insist in court that a press pass is a right, is the organization willing to take this idea to its logical conclusion? If that were the case, we'd be hearing about how CNN thinks the press room ought to be opened up to any small-time blogger who wants to ask the president a few questions.</p>
<h4>The Press Room Exists for the Benefit of the President</h4>
<p>But even if <em>everyone </em>who wanted it<em> </em>were somehow magically given space in the White House press room, it's hard to see how hobnobbing with the White House communications staff forms a pillar of a free press or free inquiry.</p>
<p>In other words, the very premise that a White House press pass is a critical component of a free press is questionable at best.</p>
<p>After all, the press room, the communications staff, and the entire White House media apparatus exists to make the president look <em>good.</em> It's not there to offer a frank exchange of information, or to divulge any information the White House doesn't want released.</p>
<p>To find <em>that</em> sort of information, one would have to engage in <em>real</em> investigative journalism in which journalists uncover facts that powerful government officials would rather not be uncovered. That, of course, is what Julian Assange has done. But you won't find many establishment American journalists defending<em> him</em>. No, in the minds of the Jim Acostas of the world, "journalism" consists of repeating the official talking points released at official press conferences.</p>
<p>And this is a lucky thing for presidents, many of whom have long understood that the purpose of White House communications is to manipulate the press.</p>
<p>In his book <em> Who Speaks for the President, The White House Press Secretary from Cleveland to Clinton, </em> W. Dale Nelson examines the history of press relations between the president since the late nineteenth century.</p>
<p>According to Nelson, press relations were considerably more informal in the nineteenth century, with presidents inviting reporters to have occasional conversations in various areas of the White House.These meetings eventually took on a more recognizable modern form with Theodore Roosevelt, who as a master propagandist, used reporters skillfully to his advantage. According to Nelson, "Roosevelt, who had seen reporters twice daily while in Albany, realized that the news columns of newspapers were what mattered, as much as the editorial columns, if not more."</p>
<p>Roosevelt thus introduced a custom in which reporters were welcome to see him while he was being shaved just before lunch. "The sessions," Nelson writes, which "came to be called presidential <span class="st">séances </span>... were limited to a favored few correspondents known to their colleagues as 'the fair-haired.'"</p>
<p>Overall, though, Roosevelt was happy to spread his own opinions around promiscuously, and as former Roosevelt aide Archie Butt <a href="https://books.google.com/books?id=EIAZBwAAQBAJ&pg=PT299&lpg=PT299&dq=%22roosevelt+understood+the+necessity+of+guiding+the+press%22&source=bl&ots=Khmz7rjcCk&sig=zIilcJilmhe3yEOvUHk9_0fZdys&hl=en&sa=X&ved=2ahUKEwiosoHUgtreAhWNIDQIHTwgDjkQ6AEwAXoECAQQAQ#v=onepage&q=%22roosevelt%20understood%20the%20necessity%20of%20guiding%20the%20press%22&f=false">remembered it</a>: "Mr. Roosevelt understood the necessity of guiding the press to suit one's own ends..."</p>
<p>Roosevelt was slowly inventing the concept of the presidential press conference, and he understood that its purpose was to advance his own interests. After all, the very concept of the press conference has always been primarily founded on the idea of one-way communication. This is true for every organization that holds a press conference. Private companies, of course, only hold press conferences to get out the word of a new product or to do damage control. In any case, the purpose of these events are to manipulate and shape the news.</p>
<p>In fact, according to historian Daniel Boorstin, press conferences aren't really news events at all. They're a "<a href="https://mises.org/wire/fake-news-america-invented-pseudo-events">pseudo-event</a>" — a 20th-century invention — which is a manufactured event designed by a certain person or organization to create news that is favorable to those who plan them.</p>
<p>US presidents have been among the most effective pioneers behind the psuedo-event, although some have been better than others. According to Boorstin:</p>
<blockquote><p>In recent years our successful politicians have been those most adept at using the press and other means to create pseudo-events. President Franklin Delano Roosevelt, whom Heywood Broun calls "the best newspaperman who has even been President of the United States," was the first modern master. While newspaper owners opposed him in the editorials few read, F.D.R. himself, with the collaboration of a friendly corps of Washington correspondents, was using front-page headlines to make news read by everybody. He was making "facts" — pseudo events — while editorial writers were simply expressing opinions. It is a familiar story how he employed the trial balloon, how he exploited the ethic of the off-the-record remarks, how he transformed the Presidential press conference from a boring ritual into a major national institution which no later president dared disrespect, and how he developed the fireside chat. Knowing that newspapermen lived on news, he helped them manufacture it. And he knew enough about news-making techniques to help shape their stories to his own purposes.</p></blockquote>
<p>Needless to say, repeating what is said at these events was never "journalism." It was simply repeating what the president wanted repeating. Nor have reporters been much troubled by this fact. If anything, they've become even more reliant on it as news has become a 24-hour-per-day business. Thus, in recent decades, reporters have begun to rely more and more on interviews, press conferences and other types of pre-packaged "pseudo events" that could give media outlets something new to report on. And then, of course, the politicians themselves — and the public relations people who work for them — are more than happy to supply the media with "pre-cooked" news, press conferences, prepared statements, and opinions.</p>
<p>In other words, the presidential media event has always existed for the benefit of presidents. Reporters who fancy themselves as people getting a "scoop" by taking notes at a press conference greatly overvalue their own work. But it's not hard to see why they imagine the First Amendment describes a special "right" applicable only to them and their friends.</p>
Ryan McMaken<img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/slideshow/public/static-page/img/wh1_0.PNG?itok=fHG6EVk8" width="240" alt="wh1_0.PNG" />44762November 16, 2018 - 5:15 PMFront page feedMichael Boldin on the Reality of Secessionhttps://mises.org/node/44761
<p>The midterm elections failed to produce an overwhelming Blue Wave, and political rancor in the US remains feverishly high. Now an astonishing <a href="http://nymag.com/intelligencer/2018/11/maybe-its-time-for-america-to-split-up.html" target="_blank">new article in <em>The Intelligencer</em></a> considers the idea of a "federated" America, broken up into several political entities associated via compacts. It's not a dystopian view of a possible future, but rather a clear-eyed projection of what a political breakup of America might actually look like.</p>
<p>But is a breakup feasible? Does it have to involve outright secession by several states, or can some form of federalism allow Team Red and Team Blue to live together, even uneasily? Is Mises's conception of true self-determination, implemented by smaller administrative units rather than huge centralized states, lost to us today? <a href="https://mises.org/Boldin" target="_blank">Michael Boldin</a> of the Tenth Amendment Center joins Jeff Deist to discuss the realities behind breaking up the US politically.</p>
Michael Boldin, Jeff Deist<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/20181116_Boldin_Node_750x516.jpg?itok=yL6pKKPh" width="240" alt="Michael Boldin on Mises Weekends" title="Michael Boldin on Mises Weekends" />44761November 16, 2018 - 4:15 PMFront page feedThe Freedom Crisis https://mises.org/node/44748
<p>[<em>This talk was delivered at the <a href="https://mises.org/events/symposium-new-and-alternative-media-ron-paul">Mises Institute’s 2018 Ron Paul-Mises Circle In Lake Jackson, Texas.</a></em><a href="https://mises.org/events/symposium-new-and-alternative-media-ron-paul">]</a><em> </em></p>
<p>There is a crisis, and only you, and people like you, can get us out of it.</p>
<p>What is this crisis? On the one hand, the statist order is collapsing all around us. America is mired in a futile war in Afghanistan. A belligerent policy toward Iran threatens to bring about a new war in the Middle East. And let’s not forget about North Korea, where the danger of a nuclear war is by no means over.</p>
<p>On the domestic front, the Fed continues the manipulation of our economy which led to the 2008 crisis. Government debt is rising to an unprecedented level.</p>
<p>Thanks to the works of great thinkers and scholars like Ludwig von Mises and Murray N. Rothbard, we know the solution to the problems that the State causes. Freedom is the answer. Only a completely free market economy and a non–interventionist foreign policy can solve our problems.</p>
<p>And people want to hear our message. The magnificent success of Dr. Ron Paul inspires all of us. His books, including <a href="https://www.amazon.com/End-Fed-Ron-Paul/dp/0446549177/?tag=misesinsti-20"> <em>End the Fed</em> </a> and <a href="https://www.amazon.com/Revolution-Manifesto-Ron-Paul/dp/0446537527/ref=as_at?imprToken=uN7mgbI5bO3SLUKFHbCEqw&slotNum=3&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&tag=lrc18-20&linkCode=xm2&camp=2025&creative=165953&creativeASIN=0446537527"> <em>T</em><em>he </em> </a> <em> <a href="https://www.amazon.com/Revolution-Manifesto-Ron-Paul/dp/0446537527/?tag=misesinsti-20"> Revolution: A Manifesto</a>, </em> are best sellers.</p>
<p>Now we are in a position to understand the crisis I spoke about earlier. Freedom means the right to hold controversial, un-PC opinions, and to act on these opinions, so long as you don’t commit aggression. But today the lunatic left is trying to suppress those who hold opinions like ours. If they had their way, we would be completely silenced. Unfortunately, there are so-called left “libertarians” who have joined this campaign of suppression. They demand that libertarians embrace the complete PC agenda. It is because of this sad situation that we need to support alternative media.</p>
<p>Here is a sample of what we are up against. Jeremy Waldron is a well-known legal academic who has taught at Oxford and now teaches at NYU Law School. In The <em>Harm in Hate Speech</em>, he calls for suppression of so-called “hate speech,” which really means anything that is un-PC.</p>
<p>Hate speech, Waldron tells, us, consists of “publications which express profound disrespect, hatred, and vilification for the members of minority groups”</p>
<p>Why should we restrict hate speech? Waldron says it is like environmental pollution:</p>
<blockquote><p>tiny impacts of millions of actions — each apparently inconsiderable in itself — can produce a large-scale toxic effect that, even at the mass level, operates insidiously as a sort of slow-acting poison, and that regulations have to be aimed at individual actions with that scale and that pace of causation in mind.</p></blockquote>
<p>But why does contagion operate only with bad effects? Will not the cumulative effects of a series of individual encounters in which members of minority groups are treated with equal respect generate a positive atmosphere of assurance, in precisely the same way that Waldron postulates for the amassing of hate messages? Waldron assumes without argument a quasi–Gresham’s law of public opinion, in which bad opinion drives out good.</p>
<p>But which process, the one that produces a positive atmosphere of assurance or the one that arouses Waldron to concern, will in fact prove the stronger? One reason to think that it is the good one is this. Waldron, in response to the charge that hate-speech laws suppress legitimate issues of controversy, notes that some matters are beyond dispute; an established consensus supports them:</p>
<blockquote><p>Suppose someone puts up posters conveying the opinion that people from Africa are nonhuman primates.… Maybe there was a time when social policy generally … could not adequately be debated without raising the whole issue of race in this sense. But that is not our situation today.… In fact, the fundamental debate about race is over — won, finished. There are outlying dissenters, a few crazies who say they believe that people of African descent are an inferior form of animal; but for half a century or more, we have moved forward as a society on the premise that this is no longer a matter of serious contestation.</p></blockquote>
<p>If Waldron is right, and only a “few crazies” believe the hateful doctrine, why is he so much in fear of the malign effects of allowing these people to publish their views unmolested by the State?</p>
<p>To be frank, I think that Waldron at times proceeds in a very unfair way. He says, in effect, to the opponents of hate-speech laws, “You say that you are willing to put up with the evils of hate speech in order to preserve the good of unhindered free speech. But you are not, in most cases, the ones who will suffer from hate speech. Why are you entitled, without evidence, to brush aside the suffering of those whom hate speech targets?”</p>
<p>That is not in itself an unreasonable question, but Waldron ignores one vital issue. He is endeavoring to make a case for the regulation of hate speech. He cannot then fairly shift the <a href="https://en.wikipedia.org/wiki/Onus_probandi"> burden of proof<em> </em> </a> entirely to the side of his opponents, saying to them, “prove that hate speech does not much affect its victims.” It is for him to show that hate speech in fact has the dire effects he attributes to it. It is not out of the question that such speech sometimes does have bad effects, but it would seem obvious that we have here an empirical issue, one that requires the citation of evidence. Waldron so far as I can see fails to offer any, preferring instead to conjure up pictures of people who, seeing or hearing examples of hate speech, recall horrid scenes of past persecution. To what extent do people actually suffer from hate speech? Waldron shows little interest in finding out. <a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=0446537527&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<p>Waldron presents these hate-crime laws as if they limited only extreme expression of hate, e.g., suggestions that people in certain groups are subhuman or need to be forcibly expelled from society, if not done away with altogether</p>
<p>He says, “Does this [the requirement that we treat everyone with dignity] mean that individuals are required to accord equal respect to all their fellow citizens? Does it mean they are not permitted to esteem some and despise others? That proposition seems counterintuitive. Much of our moral and political life involves differentiation of respect.”</p>
<p>Hate-speech laws, Waldron says, do not ignore our rights to prefer some people to others. We further remain free to criticize minority groups, so long as we do not stray into the forbidden territory of outright hatred and denigration.</p>
<p><em>Waldron is not being honest here. </em> Laws of the type Waldron champions have often been used to suppress not just vituperation but all sorts of un-PC opinions. For example, as James Kalb notes in his outstanding <a href="https://www.amazon.com/Tyranny-Liberalism-Understanding-Administered-Inquisitorial/dp/1933859822/?tag=misesinsti-20"> <em>The Tyranny of Liberalism</em></a>, “the High Court in Britain [in 2004] upheld the conviction and firing of an elderly preacher who held up a sign in a town square calling for an end to homosexuality, lesbianism, and immorality and was thrown to the ground and pelted with dirt and water by an angry crowd.</p>
<p>Those wishing further examples of how these laws work in practice may with profit consult the penetrating studies of Paul Gottfried, e.g., <a href="https://www.amazon.com/After-Liberalism-Democracy-Managerial-State/dp/0691089825/?tag=misesinsti-20"> <em>After Liberalism: Mass Democracy in the Managerial State </em> </a> and <a href="https://www.amazon.com/Multiculturalism-Politics-Guilt-Towards-Theocracy/dp/0826214177/?tag=misesinsti-20"> <em>Multiculturalism and the Politics of Guilt</em> </a> . Here we are dealing not with a matter of speculative psychology but of incontrovertible fact.</p>
<p>Those who want to suppress speech complain about “racism,” but what do they mean by that buzzword? I want to look at two words that the State and its hangers-on have employed with much success on behalf of increases in government power. One is racism. The other is equality.</p>
<p>What exactly is racism? We almost never hear a definition. I doubt anyone really knows what it is. If you’re inclined to dispute this, ask yourself why, if racism truly is something clear and determinate, there is such ceaseless disagreement over which thoughts and behaviors are racist and which are not?</p>
<p>If put on the spot, the average person would probably define racism along the lines of how Murray N. Rothbard defined anti-Semitism, involving hatred and/or the intention to carry out violence, whether State-directed or otherwise, against the despised group:</p>
<blockquote><p>It seems to me that there are only two supportable and defensible definitions of anti-Semitism: one, focusing on the subjective mental State of the person, and the other “objectively,” on the actions he undertakes or the policies he advocates. For the first, the best definition of anti-Semitism is simple and conclusive: a person who hates all Jews….</p>
<p>How, unless we are someone’s close friend, or shrink, can we know what lies in a person’s heart? Perhaps then the focus should be, not on the subject’s State of heart or mind, but on a proposition that can be checked by observers who don’t know the man personally. In that case, we should focus on the objective rather than the subjective, that is the person’s actions or advocacies. Well, in that case, the only rational definition of an anti-Semite is one who advocates political, legal, economic, or social disabilities to be levied against Jews (or, of course, has participated in imposing them).</p></blockquote>
<p>This, then, seems reasonable: (1) someone is a racist if he hates a particular racial group, but (2) since we can’t read people’s minds, and since accusing people of hating an entire group of people is a fairly serious charge, instead of vainly trying to read the suspect’s mind we ought instead to see if he favors special disabilities against the group in question.</p>
<p>Back to Rothbard: <a href="https://www.amazon.com/Tyranny-Liberalism-Understanding-Administered-Inquisitorial/dp/1933859822?SubscriptionId=AKIAI63WS3YGA3Y5U2QA&tag=lrc18-20&linkCode=xm2&camp=2025&creative=165953&creativeASIN=1933859822" target="_blank"> </a><a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=1933859822&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<blockquote><p>But am I not redefining anti-Semitism out of existence? Certainly not. On the subjective definition, by the very nature of the situation, I don’t know any such people, and I doubt whether the Smear Bund does either. On the objective definition, where outsiders can have greater knowledge, and setting aside clear-cut anti-Semites of the past, there are in modern America authentic anti-Semites: groups such as the Christian Identity movement, or the Aryan Resistance, or the author of the novel Turner’s Diaries. But these are marginal groups, you say, of no account and not worth worrying about? Yes, fella, and that is precisely the point.</p></blockquote>
<p>On the other hand, maybe a racist is someone who believes different groups tend to have common characteristics, even while acknowledging the axiomatic point that each individual person is unique. But whether it’s family structure, a penchant for alcoholism, a reputation for hard work, or a great many other qualities, Thomas Sowell has assembled a vast body of work showing that these traits are not even close to being distributed equally across populations.</p>
<p>The Chinese, for example, gained reputations in countries all over the world for working very hard, often under especially difficult conditions. (As a matter of fact, this is one of the reasons American labor unions despised Chinese workers in the nineteenth century.) By the mid-20th century, the Chinese minority dominated major sectors of the Malaysian economy even though they were officially discriminated against in the Malaysian constitution, and earned twice the income of the average Malay. They owned the vast majority of the rice mills in Thailand and the Philippines. They conducted more than 70 percent of the retail trade in Thailand, Indonesia, Cambodia, the Philippines, and Malaysia.</p>
<p>We could tell a similar story about Armenians in various parts of the world, as well as Jews and East Indians. Japanese-Americans went from being so badly discriminated against that they were confined to camps during World War II to equaling whites in income by 1959 and exceeding whites in income a decade later by one-third.</p>
<p>Likewise for Germans, whose reputations and accomplishments in craftsmanship, science, and technology have been evident not only in Germany but also among Germans in the U.S., Brazil, Australia, Czechoslovakia, and Chile. They had more prosperous farms than Brazilian farmers in Brazil, Russian farmers in Russia, and Chilean farmers in Chile.</p>
<p>Jews earn higher incomes than Hispanics in the US; this, we are solemnly told, is the result of discrimination. Oh, really? As Sowell points out, how then are we to explain why Jews earn higher incomes than Hispanics <em>in Hispanic countries</em>?</p>
<p>According to the inane rules governing American society, Sowell, being black himself, is permitted to discuss such phenomena, while the rest of us face demonization, destroyed careers, and ruined reputations should we make note of any of this forbidden testimony.</p>
<p>In order not to be suspected of racism, therefore, one must play it as safe as possible by at least pretending to believe the following propositions:</p>
<ul><li><em>Income disparities among groups are explainable entirely or in very large part by discrimination; </em></li><li><em>If a minority group is “underrepresented” in a particular profession, the cause must be racism; </em></li><li><em>If minority students are disproportionately disciplined in school, the cause must be racism, even when the teachers involved themselves belong to the same minority group; </em></li><li><em>If test scores – both in school and in the private sector – differ by racial group, this is evidence that the tests are culturally biased, even though the questions showing the greatest disparity happen to have the least cultural content. </em></li></ul><p>Not one of these statements is defensible, needless to say, but every one of them must be believed. Skeptics are, of course, racist. <a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=0691089825&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<p>The following opinions or propositions have all been declared racist at one point or another, by one source or another:</p>
<ul><li><em>Affirmative action is undesirable;</em></li><li><em>Antidiscrimination law is a violation of private property rights and freedom of contract; </em></li><li><em>Brown v. Board of Education was based on faulty reasoning;</em></li><li><em>The extent of racism in American society is exaggerated.</em></li></ul><p>There are many grounds on which one could advance these claims. But since according to popular left-wing sites like <em>Daily Kos</em>, <em>ThinkProgress</em>, and <em>Media Matters</em> it is racist to believe in any of them, it doesn’t matter what your arguments are. You are a racist. Protest all you like, but the more you try, the more the commissars smear and ridicule you. You may pretend that you have logically sound and morally unimpeachable reasons for your views, but this is all a smokescreen for racism as far as the commissars are concerned. <em>The only way you can satisfy them now is by abandoning your views</em> (and even then they’ll still question your sincerity), even though you do not hold them on disreputable grounds.</p>
<p>Thus charges of racism nearly always involve attempted mind reading – e.g., <em> that person claims to oppose anti-discrimination law out of some kind of principle, but we know it’s because he’s a racist </em> .</p>
<p>To see libertarians, who of course should know better, jumping on the thought-control bandwagon, or pretending that the whole issue is about the freedom to be a jerk, is extremely short-sighted and most unfortunate. The State uses the racism racket as justification for its further extension of power over education, employment, wealth redistribution, and a good deal else. Meanwhile, it silences critics of State violence with its magic, never-defined word racism, an accusation the critic has to spend the rest of his life trying to disprove, only to discover that the race hustlers will not lift the curse until he utterly abases himself and repudiates his entire philosophy.</p>
<p>If he tries to defend himself by protesting that he has close friends who belong to the group he is accused of hating, he’ll be ridiculed more than ever. Here’s Rothbard again:</p>
<blockquote><p>I also want to embellish a point: All my life, I have heard anti-anti-Semites sneer at Gentiles who, defending themselves against the charge of anti-Semitism, protest that “some of my best friends are Jews.” This phrase is always sneered at, as if easy ridicule is a refutation of the argument. But it seems to me that ridicule is habitually used here, precisely because the argument is conclusive. If some of Mr. X’s best friends are indeed Jews, it is absurd and self-contradictory to claim that he is anti-Semitic. And that should be that.</p></blockquote>
<p>It’s hard to argue with Rothbard here. If someone had been accused of disliking ground beef, but it could be shown that he very much enjoyed hamburgers and goulash, that would pretty much demolish the accusation, wouldn’t it?</p>
<p>I know no one who hates entire groups, and those people who do are in such a tiny minority that their organizations are equal parts lunatic and FBI informant. Likewise, I know no one who favors the use of official violence against particular groups.</p>
<p>We should want to treat people justly and with respect, of course. Any decent person feels that way. But how and why does “equality” enter the picture, except in the trivial and obvious libertarian sense that we should all equally refrain from aggression against one another?</p>
<p>The State likes nothing more than to declare war on drugs, or terrorism, or poverty, or “inequality.” The State loves “equality” as an organizing principle, because it can never be achieved. In the course of trying, the State acquires ever more power over ever more practices and institutions. Anyone who questions the premise of equality is hectored out of polite society. Quite a racket, this, and certainly no place for libertarians to be. <a href="https://www.amazon.com/Multiculturalism-Politics-Guilt-Towards-Theocracy/dp/0826214177?SubscriptionId=AKIAI63WS3YGA3Y5U2QA&tag=lrc18-20&linkCode=xm2&camp=2025&creative=165953&creativeASIN=0826214177" target="_blank"> </a><a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=0826214177&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<p>If it’s material equality we want, it would vanish the moment after we achieved it, as soon as people resumed their normal spending patterns and the goods and services offered by some people were more highly valued than those offered by others. If it’s “equality of opportunity,” then we would have to abolish the family, as so many socialist schemes have seriously contemplated, since conditions in the household play such an important role in children’s success.</p>
<p>Yes, of course we oppose the inequality that results from special State privilege enjoyed by certain people and groups. But the real issue there isn’t inequality per se, but justice and private property.</p>
<p>Even the old saw about equality in the eyes of God isn’t quite right. Erik von Kuehnelt-Leddihn, the Catholic classical liberal, noted that Judas, who betrayed Christ, was in no way the “equal” of St. John, the beloved disciple, and that the origins of “equality” lay in Lucifer’s urge to be the equal of Christ. He added:</p>
<blockquote><p>Egalitarianism under the best circumstances becomes hypocrisy; if sincerely accepted and believed in, its menace is greater. Then all actual inequalities appear without exception to be unjust, immoral, intolerable. Hatred, unhappiness, tension, a general maladjustment is the result. The situation is even worse when brutal efforts are made to establish equality through a process of artificial leveling (‘social engineering’) which can only be done by force, restrictions, or terror, and the outcome is a complete loss of liberty.</p></blockquote>
<p>If we want to be free, therefore, we must shun the State, its methods, and its language.</p>
<p>As I mentioned before, left “libertarians” want to purge anti-PC opinions from the freedom movement. Their efforts bring to mind William Buckley’s efforts to fashion a CIA-controlled “conservatism,” purged of any ideas dangerous to the State.</p>
<p>The great Murray Rothbard responded to Buckley. Writing in 1992, he said: With almost blitzkrieg swiftness, by the early 1960s, the new global crusading conservative movement, transformed and headed by Bill Buckley, was almost ready to take power in America. But not quite, because first, all the various heretics of the Right — some left over from the Original Right — all the groups that were in any way radical or could deprive the new conservative movement of its much-desired respectability in the eyes of the liberal and centrist elite, all these had to be jettisoned. Only such a denatured, respectable, nonradical, conserving right was worthy of power.</p>
<p>And so the purges began. One after another, Buckley and the <em>National Review</em> purged and excommunicated all the radicals, all the nonrespectables. Consider the roll call: isolationists (such as John T. Flynn), anti-Zionists, libertarians, Ayn Randians, the John Birch Society, and all those who continued, like the early <em>National Review</em>, to dare to oppose Martin Luther King and the civil-rights revolution after Buckley had changed and decided to embrace it.” But if, by the middle and late 1960s, Buckley had purged the conservative movement of the genuine Right, he also hastened to embrace any group that proclaimed its hard anticommunism, or rather anti-Sovietism or anti-Stalinism.</p>
<p>And of course the first anti-Stalinists were the devotees of the martyred communist Leon Trotsky. And so the conservative movement, while purging itself of genuine right-wingers, was happy to embrace anyone, any variety of Marxist: Trotskyites, Schachtmanites, Mensheviks, social democrats (such as grouped around the magazine the <em>New Leader</em>), Lovestonite theoreticians of the American Federation of Labor, extreme right-wing Marxists like the incredibly beloved Sidney Hook — anyone who could present not antisocialist but suitably anti-Soviet, anti-Stalinist credentials.”</p>
<p>Murray did not agree with supposed “experts” who presume to tell the rest of us what opinions we are permitted to hold. He said: <a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=B0074B6T94&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<blockquote><p>In past centuries, the churches constituted the exclusive opinion-molding classes in the society. Hence the importance to the State and its rulers of an established church, and the importance to libertarians of the concept of separating church and State, which really means not allowing the State to confer upon one group a monopoly of the opinion-molding function.</p></blockquote>
<p>In the 20th century, of course, the church has been replaced in its opinion-molding role, or, in that lovely phrase, the “engineering of consent,” by a swarm of intellectuals, academics, social scientists, technocrats, policy scientists, social workers, journalists and the media generally, and on and on. Often included, for old times’ sake, so to speak, is a sprinkling of social gospel ministers and counselors from the mainstream churches.</p>
<p>So, to sum up: the problem is that the bad guys, the ruling classes, have gathered unto themselves the intellectual and media elites, who are able to bamboozle the masses into consenting to their rule, to indoctrinate them, as the Marxists would say, with "false consciousness." What can we, the right-wing opposition, do about it?</p>
<p>And so the proper strategy for the right wing must be what we can call “right-wing populism”: exciting, dynamic, tough, and confrontational, rousing and inspiring not only the exploited masses, but the often-shell-shocked right-wing intellectual cadre as well. And in this era where the intellectual and media elites are all establishment liberal-conservatives, all in a deep sense one variety or another of social democrat, all bitterly hostile to a genuine Right, we need a dynamic, charismatic leader who has the ability to short-circuit the media elites, and to reach and rouse the masses directly. We need a leadership that can reach the masses and cut through the crippling and distorting hermeneutical fog spread by the media elites.”</p>
<p>The speakers at this conference stand firmly with Rothbard in rejecting the lies foisted on us by the court intellectuals. Instead, they are not afraid to call attention to alternative facts and perspectives that the elites don’t want us to know. Daniel McAdams at the Ron Paul Institute for Peace and Prosperity has again and again brought to our attention facts about Korea, Syria, Saudi Arabia, and NATO that support a noninterventionist foreign policy. Scott Horton has been a trenchant critic of war. Debra Medina saw her political career come to an end because she was skeptical about the official story of the 9-11 attack. Finally, we at the Mises Institute try through our educational programs and unparalleled web library to spread the philosophy of freedom as best we can.</p>
<p>I’d like to say a few words about the founding of the Mises Institute and of LewRockwell.com.</p>
<p>Thirty-six years ago, I wanted to do what I could to promote the Austrian School in general and the life and work of Mises in particular.</p>
<p>I first approached Mises’s widow, Margit. She agreed to be involved and to share her counsel as long as I pledged to dedicate the rest of my life to the Institute. I have kept that pledge. Margit von Mises became our first chairman. How lucky we were to have as her successor, the great libertarian businessman Burt Blumert, who was also a wise advisor from the beginning.</p>
<p>When I told Murray Rothbard about the proposed institute, he clapped his hands with glee. He became our academic vice-president and inspiration.</p>
<p>Ron Paul agreed to become our distinguished counsellor, and was also a huge help in assembling our early funding, as well as an inspiration. Other great men like F.A. Hayek, Henry Hazlitt, Lawrence Fertig, and Hans Sennholz were fervent supporters. I was surrounded by giants.</p>
<p>Murray would later say, “Without the founding of the Mises Institute, I am convinced the whole Misesian program would have collapsed.” Of course, we can’t know how things would have turned out had we made different choices. I simply wanted to do what I could, with the help of dear friends like Murray and Burt, to support the Austrian School during some very dark times, and I was prepared to let the chips fall where they may.</p>
<p>When I look back on all we’ve accomplished over the past 36 years, I can hardly believe it. Naturally we’ve promoted and kept in print works of Mises, the Nobel Prize-winning works of F.A. Hayek, and the indispensable catalogue of Murray Rothbard. Beyond that, we’ve made available to the world, free of charge, an enormous library of the most brilliant and important works ever written on Austrian economics and libertarian theory.</p>
<p>On our campus, the library and archives – based on the massive collections of Rothbard and Bob LeFevre’s Freedom School – are incomparable. We have lecture halls, classrooms, student and faculty offices, student housing, a bookstore, and much more, all thanks to our magnificent donors. <a href="https://www.amazon.com/Egalitarianism-Revolt-Against-Nature-Essays/dp/0945466234?SubscriptionId=AKIAI63WS3YGA3Y5U2QA&tag=lrc18-20&linkCode=xm2&camp=2025&creative=165953&creativeASIN=0945466234" target="_blank"> </a><a href="https://www.amazon.com/gp/aws/cart/add.html?AssociateTag=lrc18-20&SubscriptionId=AKIAI63WS3YGA3Y5U2QA&ASIN.1=0945466234&Quantity.1=1" rel="nofollow" target="_blank"> </a></p>
<p>Then there’s the entire run of the <em>Quarterly Journal of Austrian Economics</em> (which the Institute publishes), its predecessor, the <em>Review of Austrian Economics</em>, Murray Rothbard’s<em> Journal of Libertarian Studies</em>, and the publications that he edited during the especially dark days of the 1960s and 1970s. Add to that many thousands of articles on every subject under the sun and thousands of hours of free audio and video from our seminars and other events, and you have a program of self-education that at one time would have required access to university libraries and a huge investment of time and money.</p>
<p>When I founded LRC in 1999, our slogan was “Anti-State, Anti-War, Pro-Market” and this remains our slogan today. Another way to sum up that slogan is to say that LRC is pro-liberty. Our aim is to present journalism, commentary, and scholarship that embodies the libertarian ideal — deepening, refining, and applying it across a full range of economic, political, and cultural issues.</p>
<p>Everyone claims to believe in liberty, so what’s so controversial? The liberty LRC believes in is both unleashed and constrained by the right to private property as a core principle, and hence it embraces capitalism. It is guarded by a decentralized system of law enforcement, and hence favors subsidiarity and self-determination. It is historically rooted in American tradition dating back to the colonial tradition through the wonderful American revolution, which LRC believes represented a just overthrow of the state.</p>
<p>All of the speakers at this conference stand firmly against the “tutelary power” described in this classic passage by Tocqueville:</p>
<blockquote><p>Over these [citizens] is elevated an immense, tutelary power, which takes sole charge of assuring their enjoyment and of watching over their fate. It is absolute, attentive to detail, regular, provident, and gentle. … It works willingly for their happiness, but it wishes to be the only agent and the sole arbiter of that happiness. It provides for their security, foresees and supplies their needs, guides them in their principal affairs, directs their testaments, divides their inheritances. … In this fashion, every day, it renders the employment of free will less useful and more rare; it confines the action of the will within a smaller space and bit by bit it steals from each citizen the use of that which is his own. Equality has prepared men for all of these things: it has disposed them to put up with them and often even to regard them as a benefit.</p></blockquote>
Llewellyn H. Rockwell Jr.<img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/slideshow/public/static-page/img/30710200472_2ae79c701a_b.jpg?itok=pn_M_VLB" width="240" alt="30710200472_2ae79c701a_b.jpg" />44748November 16, 2018 - 2:00 PMFront page feedWhy Politicians Love the Amazon Dealhttps://mises.org/node/44758
<p>Amazon isn't the first big corporation to manipulate policymakers by shopping around the idea of relocating its headquarter to the "right" city. The "right" city, of course, is the one that provides the company with enough tax breaks and other political favors so as to make the move worth it.</p>
<p>Back in 2001, for example, Aerospace company Boeing did exactly the same thing, with Illinois and Chicago governments <a href="https://www.nytimes.com/2001/05/11/business/chicago-offering-big-incentives-will-be-boeing-s-new-home.html"> winning that contest</a>:</p>
<blockquote><p>State and local officials lobbied aggressively to lure Boeing, offering generous financial incentives, pushing the city's business and cultural advantages and creating a blue-ribbon commission.</p>
<p>In the end, the State of Illinois offered Boeing up to $41 million in tax and other incentives over the next 20 years, and Mayor Richard M. Daley said the city offered millions more in property tax abatement and other benefits over that period.</p></blockquote>
<p>Amazon has <a href="https://www.seattletimes.com/business/boeing-aerospace/amazon-plan-echoes-boeings-move-to-chicago-but-differences-are-crucial/"> done something very similar </a> with its own recent search to find the city and state that will provide the political favors necessary to lure the company to set up a second or third headquarters.</p>
<p><strong>[RELATED: "<a href="https://mises.org/wire/economic-development-corporate-welfare-scheme">'Economic Development' Is a Corporate Welfare Scheme</a>" by Nathan Keeble]</strong></p>
<p>The problem with these schemes, however, is not that they involve tax cuts. Contrary to what some <a href="https://newrepublic.com/article/146540/amazon-thriving-thanks-taxpayer-dollars"> leftwing outlets might claim</a>, a tax "incentive" (i.e., tax cut) is not a "subsidy." Only people thoroughly indoctrinated into government doublespeak think that a decline in government revenue is a type of "spending" and is thus the same thing as a subsidy.<a class="see-footnote" id="footnoteref1_t40sexj" title="Some economic development deals do involve outright subsidies in the true sense of the word, and those should be condemned as the subsidies they are." href="#footnote1_t40sexj">1</a></p>
<p>But, while deals like those made with Boeing and Amazon <a href="https://mises.org/library/no-tax-breaks-are-not-subsidies">are primarily based on tax incentives</a>, they do represent a type of public policy in which certain firms are granted political favors. The ultimate effect is one in which a government agency has decided to impose high costs on Firm A while imposing <em>relatively lower </em>costs for Firm B. In other words, it's a way for the government to pick winners and losers.</p>
<p>For a sense of the political implications of this, imagine if this were done on an individual level. Suppose that, in order to attract more "talent" to a region, the state government of Indiana declared that all new immigrants would not be required to pay income taxes. Everyone who already lived in Indiana, though, would pay the usual full tax. Or, imagine if as part of a reparations scheme, Black Americans were not longer required to pay payroll taxes. But everyone else was.</p>
<p>It's true that none of these schemes are subsidies, rightly defined. Moreover, there may be certain economic benefits that could result. Those who were no longer required to pay payrolls taxes or sales taxes would be able to spend and invest more in the local economy. But few would argue that these are neutral policies, or policies that lessen the political power of the policymaking authorities. In fact, policies like these could easily end up being significant political boons for the powers that be.</p>
<h4>Tax Incentives as Government Planning</h4>
<p>Looking at this strictly through the lens of economics, there's clearly nothing wrong with a tax break.</p>
<p>Moreover, the fact that state and local politicians are so eager to give tax breaks to certain companies shows that they <em>admit</em> that a low-tax environment is better for business, employment, and prosperity.</p>
<p><strong>[RELATED: "<a href="https://mises.org/wire/there-ain%E2%80%99t-no-economics-economic-impact-studies">There Ain’t no Economics in Economic Impact Studies</a>" by Roy Cordato]</strong></p>
<p>Once deals like the Amazon deal go down, though, we're left wondering: why do only billionaires get a tax cut, while ordinary small business owners have to keep paying the usual tax rate?</p>
<p><em>Of course</em> it would be better for the economy overall if <em>all</em> businesses got a tax break. In that case, business owners across all industries and sectors would have more money to hire workers, pay dividends, pay down debts, raise wages, or expand operations.</p>
<p>So why not do <em>that</em>?</p>
<p>Basically, politicians prefer to hand out tax cuts for only select favored groups because they think they know how to manipulate and plan the economy. Certainly, these policymakers <em>could</em> create an environment that was <em>generally </em>good for businesses and business owners, by lowering taxes and regulations overall.</p>
<p>But, that strategy would allow <em>consumers and business owners </em>to decide what businesses get built, and where, and what is produced.</p>
<p>But, as far as politicians are concerned, that's allowing entirely too much freedom. Moreover, incentive deals provide a way for politicians to rationalize not providing tax relief for the economy overall. "See?" they'll say. "Companies want to come here even with our high tax rates!"</p>
<h4>Favoring Large Firms Over Small or Indigenous Firms</h4>
<p>Another problem with these schemes is that they favor established, large businesses over small firms that are just getting started.</p>
<p>The main fault in this idea is immediately obvious if we consider the fact that Amazon was <em>itself</em> once a small startup. Indeed, most big firms today once began as small firms which had to build themselves up by catering to consumer tastes in the marketplace. But, it's impossible for politicians — or anybody else — to predict ahead of time what new startups today will be the future's big multinational firms.</p>
<p>Schemes like the Amazon and Boeing "incentive" plans however, are based on the idea that it is more important to cater to large firms than to foster an environment in which local businesses thrive and grow.</p>
<p>This is often done for political reasons. Once a large firm is enticed to move to a new city, politicians and "economic development" bureaucrats can claim they have given the local economy a shot in the arm. They will have bragging rights when socializing with their peers at conferences and at meetings with other mayors or state governors. It helps politicians feel important.</p>
<p>In other words, bringing in a company like Amazon is "sexy." It gets headlines. It may even get votes.</p>
<p>Incentive programs may also require that the new company keep track of how many jobs it creates or how much tax revenue it creates. And then report those metrics to the government. That makes it easy for politicians to then claim they "created jobs."</p>
<p>A general pro-business environment would create jobs too, of course. But it's harder to calculate the job creation and wealth creation that takes place when a thousand small- or medium-sized firms grow and hire more people. It's especially hard for a politician to then connect that economic growth to a specific policy that the politicians favored.</p>
<p>So, in a classic case of the <a href="https://mises.org/library/which-seen-and-which-not-seen">"seen vs. unseen" problem</a>, large corporations are often favored simply because they are more visible. They offer better opportunities for politicians to get attention.</p>
<h4>Making Life Harder for Smaller Business</h4>
<p>And additional problem with bringing in certain favored firms with tax incentives is that it can increase costs for smaller and indigenous firms. While the presence of the new big firm may help some vendors who will provide goods and services to the large firm — such as a local janitorial company which provides building maintenance for the new large firm — many other firms will have to pay higher prices as a result. For example, the new firm may drive up construction costs or energy costs for everyone in the region. It may drive up local costs for catering services or accountant services. Office space may become more expensive. This will then drive up the cost of doing business for many other local businesses. Those firms may then have to eliminate jobs as a result.</p>
<p>And then, of course, there are the intangible costs in terms of time and the quality of life. The presence of the new firm may lead to overcrowding on highways or in local schools, or at local parks.</p>
<p>These schemes may also serve to make a local economy less diverse or more dependent on a single firm or single industry. When politicians decide that a local economy ought to be a "tech hub" or some other type of industry-specific "hub," they are using public policy to tie that local economy to a specific industry. If that industry or business fails or goes into decline, the local economy will go down with it. Had politicians refrained from favoring certain firms, however, this fate might have been avoided.</p>
<p>Supporters of incentives schemes may claim "well, it will all even out because the new big firm will bring more tax revenue. And the rising prices will benefit local firms as much as they will hurt local firms. Some win, some lose, but the net benefit is surely positive!"</p>
<p>Or they might point out that even without incentive schemes, certain economies can become dependent on certain industries or companies.</p>
<p>That's all possible. But, frankly, defenders of these schemes don't have enough data to know for sure.</p>
<p>In the end, incentives schemes and other forms of government planned "economic development" are based on conjecture and speculation. They're based on politicians thinking themselves qualified to re-shape and re-direct a region's economy to suit what is — in their minds — trendy, exciting, or politically advantageous. In the long run, more firms, more wealth, and more growth could be achieved by simply cutting taxes and regulatory requirements. And this strategy would have the added benefit of not inserting government preferences for certain firms and industries over others.</p>
<p>After all, supporters of special favors for certain powerful firms can't know if their incentive plans will lead to a net benefit in terms of tax revenues or employment growth — if compared to a plan in which taxes and regulations were scaled back.</p>
<p>And it's not likely that they care.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_t40sexj"><a class="footnote-label" href="#footnoteref1_t40sexj">1.</a> Some economic development deals do involve outright subsidies in the true sense of the word, and those should be condemned as the subsidies they are.</li>
</ul>Ryan McMaken<img typeof="foaf:Image" src="https://mises.org/sites/default/files/styles/slideshow/public/static-page/img/amazon1.PNG?itok=8_kqDC0W" width="240" alt="amazon1.PNG" />44758November 16, 2018 - 11:15 AMFront page feedIt's Not a Problem When the Chinese Don't Spend Their Dollars Herehttps://mises.org/node/44692
<p>What if you found out that the Chinese are burying dollars under the Great Wall of China? What would your reaction be? Would you be upset that the Chinese weren’t spending those dollars on U. S. exports, narrowing Americans’ balance of trade deficit with China? Judging by the anti-Chinese sentiment characterizing public discussion of Chinese-U.S. economic relations these days, I suspect you would.</p>
<p>This was a question I always posed to my university honors students when going through the fundamentals of international economics. It was a great teaching moment, because without exception, and without prompting, the students consistently parroted media concern about the balance of trade deficit with China, and that if the Chinese were spending these dollars on U.S. goods it would reduce the U. S. trade deficit, benefiting the United States.</p>
<p>While it is true that the U.S. trade deficit would fall (assuming you don’t count the dollars as Chinese imports), the truth is that the Chinese burying dollars under the Great Wall would be a boon to American living standards! Hard to believe? Let’s consider a simple example.</p>
<p>Suppose Americans are buying Chinese travel luggage for $25 per piece, and the dollars end up under China’s Great Wall. What is going on here? Americans are getting travel luggage and the Chinese are getting pieces of paper that, as far as the United States is concerned, are easily produced at relatively low cost. In other words, Americans get travel luggage in exchange for extra turns of the printing press crank at the Bureau of Engraving and Printing. Sounds like a good deal for Americans if you ask me.</p>
<p>Indeed, had the Chinese used those dollars to buy say, soybeans, Americans would still have the travel luggage, but less soybeans. This necessarily means a lower living standard (less soy sauce and tofu at American Chinese restaurants) compared to the dollars going under the Great Wall. Indeed, dollars going under the Great Wall mean Americans are getting the travel luggage virtually free. What’s wrong with that?</p>
<p>Indeed, it’s analogous to you shopping for shoes, paying by check, after which the shoe store proprietor asks you if it would be OK with you if he hung your check in a picture frame in the store rather than presenting it to the bank for payment. This means you’d be getting the shoes for free. Again, what’s wrong with that? It means a higher living standard for you.</p>
<p>The overall lesson here is that when people in various countries trade with each other, exports should be viewed as the cost of doing business internationally, while its imports are the benefit. The reason dollars going under the Great Wall in exchange for travel luggage is so beneficial is that the opportunity cost of producing the dollars (a few more cranks of the printing press) is so low.</p>
<p>Of course, it’s always possible that the dollars could reappear as the Chinese started using them for what dollars are best suited to do: buy U.S. goods (like soybeans) or stocks and bonds. If that were to happen, it would mean Americans did not get the travel luggage almost free after all. What was <em>almost</em> a free lunch for Americans turns out to be <em>not</em> almost free after all.</p>
T. Norman Van Cott<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/mattress1.PNG?itok=w-TiGvZF" width="240" alt="mattress1.PNG" />44692November 16, 2018 - 11:00 AMFront page feedThere's No #metoo When Economies Collapse — You Do What You Have to Dohttps://mises.org/node/44709
<p>The <a href="https://www.nytimes.com/2018/10/27/world/europe/prostitutes-greece-crisis.html?rref=collection%2Fsectioncollection%2Feurope&action=click&contentCollection=europe&region=stream&module=stream_unit&version=latest&contentPlacement=16&pgtype=sectionfront">New York Times</a> reminded us that two things which go together are a currency crisis and prostitution. The featured story on October 28 was the red light district in uber-depressed Athens where “Dimitra, a middle-aged woman who lost her [flower] shop in the crisis and now works as a madam on Filis Street. ‘I used to be called Mrs. Dimitra, but now I’ve become a whore.’”</p>
<p>Reporter<strong> </strong>Iliana Magra begins her piece relating the sales pitch for the services of Elena for a price of 20 euros ($23). She writes,</p>
<blockquote><p>The trade is more desperate now because of Greece’s lost decade since the 2008 financial crisis, which has left no profession unscathed. The collapsed economy and the arrival of tens of thousands of migrants have pushed even more women into prostitution — even as prices have fallen through the floor.</p></blockquote>
<p>Meanwhile, Maduro’s socialism and hyper-inflation makes life unbearable in Venezuela, and neighboring Columbia has seen an influx of women willing to work in the oldest profession.</p>
<p><em><a href="https://www.newsweek.com/venezuela-women-turning-prostitution-survive-1088793">Newsweek </a> </em>reports,</p>
<blockquote><p>In one <a href="https://www.newsweek.com/topic/prostitution">brothel</a> of 60 women, 58 were from Venezuela and just two were from Colombia. One woman, a mother of two who was a ballerina and businesswoman in her home country, told Sky News, “I would give this up if there was any other option. This is a shameful job, but what option do I have?</p></blockquote>
<p>Gabriel Sánchez, who operates a brothel in Arauca, Colombia, told the <a href="https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article174808061.html"><em> Miami Herald</em></a>, “We’ve got lots of teachers, some doctors, many professional women and one petroleum engineer,” he yelled over the din of <em>vallenato </em> music. “All of them showed up with their degrees in hand.”</p>
<p>With shelves empty in Venezuela, women must either wait in line for hours to buy flour at prices set by the government or turn to the black market and pay many times more. Instead, a woman named Dayana, told the Herald she can make $50 to $100 a night as a prostitute, which she admits isn’t a good job, “But I’m thankful for it, because it’s allowing me to buy food and support my family.”</p>
<p>Jim Wyss writes for the Herald,</p>
<blockquote><p>Marili, a 47-year-old grandmother and former teacher, said there was a time when she would have been ashamed to admit she’s a prostitute. Now she says she’s grateful to have a job that allows her to buy hypertension medication for her mother back in Caracas.</p>
<p>“We’re all just women who are working to support our families,” she said. “I refuse to criticize anyone, including myself. We all have to work.”</p></blockquote>
<p>The debauchery of the Weimar era mark was followed by women and men resorting to activities they would have never dreamed of to live.</p>
<p>“When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete,” wrote George J.W. Goodman “Adam Smith” in his book <em>Paper Money</em>. He explained, “Prostitutes of both sexes roamed the streets.”</p>
<p>Mel Gordon wrote in <em>Voluptuous Panic: The Erotic World of Weimar Berlin,</em></p>
<blockquote><p>Arriving in Berlin during the hyperinflation crisis (1923), Klaus Mann—son the great German novelist Thomas Mann—remembered walking past a group of dominatrices: “Some of them looked like fierce amazons, strutting in high boots made of green, glossy leather. One of them brandished a supple cane and leered at me as I passed by. ‘Good evening, madam,’ I said. She whispered in my ear, ‘Want to be my slave? Costs only six billions and a cigarette.’</p></blockquote>
<p>Thomas Mann would write the novella <em>Disorder and Early Sorrow</em> that was the focus of professor Paul Cantor’s seminal 1994 essay “<a href="https://mises-media.s3.amazonaws.com/rae7_1_1_2.pdf?file=1&type=document">Thomas Mann in Light of Austrian Economics</a>.”</p>
<p>Cantor describes Mann’s work.</p>
<blockquote><p>Set in Weimar Germany during the time of the hyperinflation, this story takes on new meaning once it is analyzed in terms of [Ludwig von] Mises's theory of inflation and the crack-up boom. With Mann's uncanny ability to mirror economic and social reality in his fiction, he succeeds even without any knowledge of Austrian economics in bringing out the psychological ramifications of an inflationary environment with a subtlety of insight Mises would have admired.</p></blockquote>
<p>While prostitution isn’t a part of “Disorder” per se, Cantor reflects,</p>
<blockquote><p>Hence to tamper with the basic money supply is to tamper with a community's sense of value. By making money worthless, inflation threatens to undermine and dissolve all sense of value in a society.</p>
<p>Thus Mann suggests a connection between inflation and nihilism. Perhaps in no society has nihilism ever been as prevalent an attitude as it was in Weimar Germany:</p></blockquote>
<p>Cantor continues,</p>
<blockquote><p>Mann documents the fall of the middle class in the case of the Hinterhofers:</p>
<p>two sisters once of the lower middle class who, in these evil days, are reduced to living "au pair" as the phrase goes and officiating as cook and housemaid for their board and keep. (p. 191)</p>
<p>Mann shows how hard it is for these women to live with their sense of economic degradation, portraying the shame and bitterness of Cecilia Hinterhofer:</p>
<p>Her bearing is as self-assertive as usual, this being her way of sustaining her dignity as a former member of the middle class. For Fraulein Cecilia feels acutely her descent into the ranks of domestic service. . . . She hands the dishes with averted face and elevated nose-a fallen queen. (p. 202)</p></blockquote>
<p>Mann’s story illustrates how living in hyperinflation forces the populace to live for the moment, with formerly middle-class women and men doing whatever they must in order to survive.</p>
<p>In today's Greece, the supply of prostitutes exceeds demand in the sense that many potential customers do not have any money. “In 2012, it would require an average of 39 euros” for a client to hire a prostitute in a brothel, Grigoris Lazos, a professor of criminology at Panteion University in Athens told the <em>New York Times</em>, “while in 2017 just €17 — a 56 percent decrease.”</p>
<p>The <em>Times</em> reports there are 798 brothels operating in Athens, while the local police know of 300 bordellos. However, men in Athens don’t have jobs or money. “They don’t have money,” an Albanian prostitute named Monica told the <em>Times</em>. “They haven’t had money for the past seven years.”</p>
<p>While #metoo is sweeping American culture, it’s do what you have to do where the currency and economy have collapsed. For now the US dollar is strong and all is well. Meanwhile<em> Bloomberg </em>headlines recently screamed, “<a href="https://www.bloomberg.com/news/articles/2018-10-29/treasury-sees-2018-borrowing-needs-surging-to-1-34-trillion?fbclid=IwAR3SMzSUkyd8TBRgjbHJ91ccg-4pgvpRSoF782Wm_p0u-ZmfWIRq5zHm4r0">Treasury Sees 2018 Borrowing Needs Surging to $1.34 Trillion</a>.”</p>
Doug French<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/broke.PNG?itok=XPf3Nlfd" width="240" alt="broke.PNG" />44709November 16, 2018 - 6:00 AMFront page feedFree Will and the Market Placehttps://mises.org/node/44750
<p>Free will is the starting point of all ethical thinking and it plays an equally important part in the business of making a living. If man were not endowed with this capacity for making choices, he could not be held accountable for his behavior, any more than could a fish or a fowl — an amoral being, a thing without a sense of morals. So, if man were devoid of this capacity, his economics would be confined to grubbing along on whatever he found in nature. It is because man is capable of taking thought, of making evaluations and decisions in favor of this or that course, that we have a discipline called economics.</p>
<p>In making his ethical choices, man is guided by a code believed to have the sanction of God; and experience has shown that the good life to which his instinct impels him can be achieved only if he makes his decisions accordingly. The Ten Commandments have been called the Word of God; they can also be described as natural law, and natural law has been described as nature's way of applying means to ends. Thus, we say that nature in her inscrutable ways had determined that water shall always run down hill, never up; that is a natural law, we say, because it is without exception, inevitable, and self-enforcing. Therefore, when we decide to build ourselves a house, we set it at the bottom of the hill so as to avail ourselves of a supply of water. If we put the house at the top of the hill, nature will not cooperate in our obstinacy and we shall not have any water in the house; unless, of course, we discover and make use of some other natural law to overcome the force of gravity.</p>
<p>That is to say, nature is boss and we had better heed her teaching when we make decisions or we shall not achieve the ends we desire. But, her teaching is not freely given; we must apply ourselves diligently to a study of her ways to find out what they are. The prerequisite for a successful investigation is to admit that nature has the secret we are trying to uncover; if we begin by saying that in this or that field nature has no laws, that humans make their own way without reference to nature, we shall end up knowing nothing.</p>
<p>If, for instance, we discard the Ten Commandments, declaring them to be mere manmade conventions changeable at will, we end in chaos and disorder — evidence that we are on the wrong track. Likewise, if we declare that God in his infinite wisdom chose to disregard economics, that in ordering the world he overlooked the ways and means for man's making a living, that in this particular field man has to work out his own formulae, we will end up with a poor living.</p>
<h4>"Economics" without Principles</h4>
<p>And that is exactly what has happened in the study of economics; many experts in this field are of the opinion that nature can tell us nothing about the business of making a living; it's all a matter of human manipulation. That is why economics is so often a meaningless hodgepodge of expediencies, leading us to no understanding and no good end. I might add that the incongruities of ethical life, such as divorce, juvenile delinquency, international friction, and so on, are largely the result of the current conceit that there is no warrant for ethics in nature, no positive laws for moral behavior; but that is another subject.</p>
<p>I shall try to present some evidence that nature has her own rules and regulations in the field of economics, indicating that we had better apply ourselves to learning about them if we would avoid the obviously unsatisfactory results from relying on man's ingenuity. Come with me into the laboratory of experience, which is the source of much understanding.</p>
<h4>The First Pioneer</h4>
<p>Let us cast our mind's eye back to the time when there was no Madison, Wisconsin, or any other city west of the Alleghenies, when only the seed of a later social integration was planted here — when a lone frontiersman decided to settle on this spot of earth. The primary consideration which influenced his decision was the possibility of making a living here. He selected what later became Madison because the land was fertile, water was plentiful, the forests abounded with wood for his comfort, meat for his sustenance, and hides for his raiment. This was the workshop from which he could expect good wages for his efforts. Without benefit of economic textbooks, he hit upon a couple of economic laws: (1) that production, or wealth, consists of useful things resulting from the application of human labor to natural resources; (2) that wages come from production.</p>
<p>These laws, these precepts of nature, are still in force and always will be despite the efforts of some "experts" to rescind them. Often the yearning for manna from heaven obscures the fact that only by the application of labor to raw materials can economic goods appear, but the yearning is so strong that men ask government to play God and reproduce the miracle of the wilderness.</p>
<p>Government, of course, can produce nothing, let alone a miracle; and when it presumes to drop manna on its chosen people, it simply takes what some produce and hands it over to others; its largess is never a free gift. And as for wages, they still come from production, even though there are sectarians who maintain that wages come from the safety vaults of a soulless boss. The consequences of disregarding these two dictates of nature are too well known to call for discussion.</p>
<p>Returning to our first pioneer, his initial wages are meager. That is because he is compelled by the condition of his existence to be a jack-of-all-trades, proficient in none. He produces little and therefore has little. But he is not satisfied with his lot for, unlike the beasts in the forest or the fish in the sea, man is not content merely to exist.</p>
<p>And here we hit upon a natural law which plays a prime role in man's economic life: He is the insatiable animal, always dreaming of ways and means for improving his circumstances and widening his horizon. The cabin built by the pioneer to protect himself from the elements was castle enough in the beginning; but soon he begins to think of a floor covering, of pictures on the wall, of a lean-to, of a clavichord to brighten his evenings at home and, at long last, of hot-and-cold running water to relieve him of the laborious pumping. Were it not for man's insatiability, there would be no such study as economics.</p>
<h4>A Neighbor Arrives</h4>
<p>But the things the pioneer dreams about are unattainable as long as he is compelled to go it alone. Along comes a second pioneer, and his choice of a place to work is based on the same consideration that influenced his predecessor. What wages can he get out of the land? However, as between this location and others of equal natural quality, this one is more desirable because of the presence of a neighbor. This fact alone assures a greater income, because there are jobs that two men can perform more easily than can one man alone, and some jobs that one man simply cannot do. Their wages are mutually improved by cooperation. Each has more satisfactions.</p>
<p>Others come, and every accretion to the population raises the wage level of the community. In the building of homes, in fighting fires and other hazards, in satisfying the need of entertainment or in the search for spiritual solace, a dozen people working together can accomplish more than twelve times what each one, working alone, can do. Still, the wage level of the community is rather low, for it is limited by the fact that all the workers are engaged in the primary business of existence on a self-sustaining, jack-of-all-trades basis.</p>
<p>At some point in the development of the community it occurs to one of the pioneers that he has an aptitude for blacksmithing; and if all the others would tum over to him their chores in this line, he could become very proficient at it, far better than any of his neighbors. In order for him to ply this trade the others must agree to supply him with his needs. Since their skill at blacksmithing is deficient, and since the time and effort they put into it is at the expense of something they can do better, an agreement is not hard to reach. Thus comes the tailor, the carpenter, the teacher, and a number of other specialists, each relieving the farmers of jobs that interfere with their farming. Specialization increases the productivity of each; and where there was scarcity, there is now abundance.</p>
<h4>Specialists with Capital</h4>
<p>The first condition necessary for specialization is population. The larger the population the greater the possibility of the specialization which makes for a rising wage level in the community. There is, however, another important condition necessary for this division of labor, and that is the presence of capital. The pioneers have in their hams and pantries more than they need for their immediate sustenance, and are quite willing to invest this superfluity in other satisfactions. Their savings enable them to employ the services of specialists; and the more they make use of these services the more they can produce and save, thus to employ more specialists.</p>
<p>This matter of savings, or capital, may be defined as that part of production not immediately consumed, which is employed in aiding further production, so that more consumable goods may become available. In man's search for a more abundant life he has learned that he can improve his circumstances by producing more than he can presently consume and putting this excess into the production of greater satisfactions.</p>
<h4>Respect for Property</h4>
<p>Man has always been a capitalist. In the beginning, he produced a wheel, something he could not eat or wear, but something that made his labors easier and more fruitful. His judgment told him what to do, and of his own free will he chose to do it. That makes him a capitalist, a maker and user of capital. The wheel, after many centuries, became a wagon, an automobile, a train, and an airplane — all aids in man's search for a better living. If man were not a capitalist, if he had chosen not to produce beyond requirements for immediate consumption — well, there would never have been what we call civilization.</p>
<p>However, a prerequisite for the appearance of capital is the assurance that the producer can retain for himself all he produces in the way of savings. If this excess of production over consumption is regularly taken from him, by robbers or tax-collectors or the elements, the tendency is to produce no more than can be consumed immediately. In that case, capital tends to disappear; and with the disappearance of capital, production declines, and so does man's standard of living.</p>
<p>From this fact we can deduce another law of nature: that security in the possession and enjoyment of the fruit of one's labor is a necessary condition for capital accumulation. Putting it another way, where private property is abolished, capital tends to disappear and production comes tumbling after. This law explains why slaves are poor producers and why a society in which slavery is practiced is a poor society. It also gives the lie to the promise of socialism in all its forms; where private property is denied, there you will find austerity rather than a functioning exchange economy.</p>
<h4>The Trading Instinct</h4>
<p>The possibility of specialization as population increases is enhanced by another peculiarly human characteristic — the trading instinct. A trade is the giving up of something one has in order to acquire something one wants. The trader puts less worth on what he possesses than on what he desires. This is what we call evaluation.</p>
<p>It is not necessary here to go into the theory, or theories, of value except to point out that evaluation is a psychological process. It springs from the human capacity to judge the intensity of various desires. The fisherman has more fish than he cares to eat but would like to add potatoes to his menu; he puts a lower value on fish than on potatoes. The farmer is in the opposite position, his ham being full of potatoes and his plate devoid of fish. If an exchange can be effected, both will profit, both will acquire an added satisfaction. In every trade — provided neither force nor fraud is involved — seller and buyer both profit.</p>
<p>Only man is a trader. No other creature is capable of estimating the intensity of its desires and of giving up what it has in order to get something it wants. Man alone has the gift of free will. To be sure, he may go wrong in his estimates and may make a trade that is to his disadvantage. In his moral life, too, he may err. But, when he makes the wrong moral choice, we hold that he should suffer the consequences, and hope that he will learn from the unpleasant experience.</p>
<p>So it must be in his search for a more abundant life. If in his search for a good life the human must be allowed to make use of his free will, why should he not be accorded the same right in the search for a more abundant life? Many of the persons who would abolish free choice in the market place logically conclude that man is not endowed with free will, that free will is a fiction, that man is merely a product of his environment. This premise ineluctably leads them to the denial of the soul and, of course, the denial of God.</p>
<p>Those who rail against the market place as if it were a den of iniquity, or against its techniques as being founded in man's inhumanity, overlook the function of the market place in bringing people into closer contact with one another. Remember, the market place makes specialization possible, but specialization makes men interdependent. The first pioneer somehow or other made his entire cabin; but his son, having accustomed himself to hiring a professional carpenter, can hardly put up a single shelf in a cabin. And today, if some catastrophe should cut off Madison from the surrounding farms, the citizens of the city would starve. If the market place were abolished, people would still pass the time of day or exchange recipes or bits of news; but they would no longer be dependent on one another, and their self-sufficiency would tend to break down their society. For that reason we can say that society and the market place are two sides of the same coin. If God intended man to be a social animal, he intended him to have a market place.</p>
<h4>Traders Serve One Another</h4>
<p>But, let us return to our imaginary experiment. We found that as the pioneer colony grew in numbers, a tendency toward specialization arose. It was found that by this division of labor more could be produced. But this profusion from specialization would serve no purpose unless some way were found to distribute it. The way is to trade. The shoemaker, for instance, makes a lot of shoes of various sizes, but he is not interested in shoes per se; after all, he can wear but one pair and of one particular size. He makes the other shoes because other people want them and will give him in exchange the things he wants: bread, raiment, books, what not — the things in which his interests naturally lie. He makes shoes in order to serve himself, but in order to serve himself he has to serve others. He has to render a social service in order to pursue his own search for a more abundant life.</p>
<p>In our lexicon we refer to a business undertaking by the government as a social service; but this is a misnomer, because we can never be certain that the service rendered by the government business is acceptable to society. Society is compelled to accept these services, or to pay for them even if un-wanted. The element of force is never absent from a government-managed business. On the other hand, the private entrepreneur cannot exist unless society voluntarily accepts what he has to offer; he must render a social service or go out of business.</p>
<h4>Profits Come from Patrons</h4>
<p>Let us suppose that this shoemaker is especially efficient, that many people in the community like his service and therefore trade with him. He ac-quires what we call a profit. Has he done so at the expense of his customers? Do they lose because he has a profit? Or, do they not gain in proportion to the profit he makes? They patronize him because the shoes he offers are better than they could make themselves or could get elsewhere, and for that reason they are quite willing to trade with him. They want what they get more than they want what they give up and therefore profit even as he profits.<br />If he goes wrong in his estimate of their requirements, if he makes the wrong sizes, or styles that are not wanted, or uses inferior materials, people will not patronize him and he will suffer a loss. He will have no wage return for the labor he puts in and no return for the capital — the hides and machinery — which he uses in making his unwanted product. The best he can do under the circumstances, in order to recoup some of his investment, is to hold a bargain-basement sale. That is the correlative of profits-losses.</p>
<p>No entrepreneur is wise enough to predetermine the exact needs or desires of the community he hopes to serve and his errors of judgment always come home to plague him. But, the point to keep in mind is that when an entrepreneur profits, he does so because he has served his community well; and when he loses, the community does not gain. A business that fails does not prosper society.</p>
<h4>The Distributive Function</h4>
<p>The market place not only facilitates the distribution of abundances — including the abundances that nature has spread all over the globe, like the coal of Pennsylvania for the citrus fruit of Florida, or the oil of Iran for the coffee of Brazil — but it also directs the energies of all the specialists who make up society. This it does through the instrumentality of its price-indicator. On this instrument are re-corded in unmistakable terms just what the various members of society want, and how much they want it. If the hand on this indicator goes up, if higher prices are bid for a certain commodity, the producers are advised that there is a demand for this commodity in excess of the supply, and they then know how best to invest their labors for their own profit and for the profit of society. A lower price, on the other hand, tells them that there is a superfluity of a certain commodity, and they know that to make more of it would entail a loss because society has a sufficiency.</p>
<p>The price-indicator is an automatic device for recording the freely expressed wishes of the community members, the tally of their dollar ballots for this or that satisfaction, the spontaneous and noncoercive regulator of productive effort. One who chooses to tamper with this delicate instrument does so at the risk of producing a scarcity of the things wanted or an overabundance of unwanted things; for he disturbs the natural order.</p>
<h4>Beneficiaries of Competition</h4>
<p>One more social function of the market place needs mentioning. It is the determinant of productive efficiency, provided, of course, it is permitted to operate according to the unimpeded motive power of free will. In the primitive economy we have been examining, one shoemaker can take care of the shoe needs of the community. Under those conditions, the efficiency of that server is determined by his skill, his industry, and his whim. He alone can fix the standard of the service he renders his customers, or the prices he charges. Assuming that they can go nowhere else for shoes, their only recourse if they do not like his services or his prices is either to go without or to make their own footwear.</p>
<p>As the community grows in size, another shoe specialist will show up to share the trade with the first one. With the appearance of a second shoemaker the standard of efficiency is no longer determined by one producer. It is determined by the rivalry between them for the trade of the community. One offers to fix shoes "while you wait," the other lowers his prices, and the first one comes back with a larger assortment of sizes or styles. This is competition.</p>
<p>Now the beneficiaries of the improved services resulting from competition are the members of society. The more competition and the keener the competition, the greater the fund of satisfactions in the market place. Oddly enough, the competitors do not suffer because the abundance resulting from their improved efficiency attracts more shoe customers; "competition," the old adage holds, "is good for business."</p>
<p>If, perchance, one of the competitors cannot keep up with the improving standard of performance, he may find himself out of business; but the increased productive activity resulting from the competition means that there are more productive jobs to be filled, and in all likelihood he can earn more as a foreman for one of the competitors than he could as an entrepreneur. Even those physically unable to care for themselves and dependent on others are benefited by competition; when there is an abundance in the market place, charity can be more liberal.</p>
<h4>Immutable Laws Prevail</h4>
<p>I am not attempting here a complete course in economics. What I have tried to show is that in economics, as in other disciplines, there are inflexible principles, inevitable consequences, immutable laws written into the nature of things. Exercising his free will, man can attempt to defy the law of gravitation by jumping off a high place; but the law operates without regard for his conceit, and he ends up with a broken neck.</p>
<p>So, if the first pioneer had set up with force of arms a claim to everything produced in the Madison area, other pioneers would not have come near, and the community known as Madison would never have been born. Or, if he could have collected tribute, also by force of arms, from every producer in the area, he would have driven prospective specialists to places where private property was respected. If the first shoemaker had established himself, with the help of law, as a monopolist, barring competition, the shoes that Madisonians wore would have been of poor quality, scarce, and costly; the same result would have followed any legal scheme to subsidize his inefficiency at the expense of taxpayers. If early Madisonians had decreed to abolish the market place with its price-indicator, specialization and exchange would have been thwarted and the economy of Madison would have been characterized by scarcity.</p>
<p>The laws of economics, like other natural laws, are self-enforcing and carry built-in sanctions. If these laws are either unknown or not heeded, the inevitable eventual penalty will be an economy of scarcity, a poor and uncoordinated society. Why? Because the laws of nature are expressions of the will of God. You cannot monkey with them without suffering the consequences.</p>
Frank Chodorov44750November 15, 2018 - 3:15 PMFront page feedThe Economic Basis of Culturehttps://mises.org/node/14144
<p>[<em>From the 2006 <a href="https://mises.org/library/commerce-and-culture">Commerce and Culture Seminar</a>, presented by Paul Cantor.</em>]</p>
<p>Now that Marxists have lost the economic arguments, culture is now the last battleground between Marxism and free markets.</p>
<p>Marxists say mass production of anything ruins it. But this is elitist thinking. In Marxist thinking, there is a bias against commercial culture.</p>
<p>But, art and culture depends on a division of labor. Without attaining a certain sophisticated level of economic development, cannot have what we now think of as culture.</p>
<p>Up until 1800, the world was too poor to care about art. The triumph of capitalism created a mass audience for art and books. Art is an example of spontaneous order. Art is like the market. Art and culture are messy and experimental. Academics would like art to be predictable, but it cannot be. Art improves from being part of a market.</p>
<p>Lecture 1 of 10 from Paul Cantor's <a href="https://mises.org/library/commerce-and-culture"><em>Commerce and Culture</em></a>.</p>
Paul A. Cantor<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/Commerce%20and%20Culture_Cantor_20140923.jpg?itok=vU-jDMbx" width="240" alt="Commerce and Culture" title="Commerce and Culture" />14144November 15, 2018 - 2:00 PMFront page feed Indians and the Confederacy, Part 1: "Civilizing" The Five Nationshttps://mises.org/node/44733
<p>Season 3, Episode 31. In 1861, the Five Civilized Tribes — the Cherokees, Creeks, Chickasaws, Choctaws, and Seminoles — would be faced with the decision of staying neutral or choosing a side in the Civil War. To understand their decision, Chris Calton takes a look at the long history of Indians becoming, in the eyes of Americans, "civilized".</p>
<p>Chris Calton recounts the controversial history of the Civil War. This is the 31st episode in the third season of Historical Controversies. You may support this podcast financially at <a href="http://Mises.org/SupportHC">Mises.org/SupportHC</a>.</p>
Chris Calton<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/Historical%20Controversies%20Podcast_750x516_Season3_20180412.jpg?itok=jP2U4Ibk" width="240" alt="Introduction to the Civil War" title="Introduction to the Civil War" />44733November 15, 2018 - 11:45 AMFront page feedVenezuela Has Hyperinflation. Now What?https://mises.org/node/44690
<p>Venezuela is the <a href="http://sites.krieger.jhu.edu/iae/files/2017/04/Venezuela_Enters_the_Record_Book.pdf">fifty-seventh country to encounter hyperinflatio</a>n in modern history. The economist Steve Hanke estimated — using <a href="http://sites.krieger.jhu.edu/iae/files/2018/02/Hanke-Bushnell_Venezuela.pdf">the doctrine of purchasing power parity (PPP)</a> — that the country’s monthly inflation exceeded 50 percent for more than thirty days in November 2016. Therefore, it entered the list of <a href="https://object.cato.org/sites/cato.org/files/pubs/pdf/hanke-krus-hyperinflation-table-may-2013.pdf">Hanke-Krus hyperinflations</a>.The International Monetary Fund (IMF) estimates that Venezuela’s annual inflation will reach 1,000,000 percent by the end of 2018, and the country’s National Assembly recently estimated that it would reach 4,000,000 percent.</p>
<p>Notwithstanding the estimates, predictions made in hyperinflationary periods are always erroneous because <a>inflation volatility increases along with inflation rates</a>.</p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV1_0.jpg?itok=Z2n6-Mkz" title="HV1.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78494-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV1_0.jpg?itok=8nbOgDCh" width="693" height="416" alt="HV1_0.jpg" title="" /></a></div>
<p>As shown in the graph above, annual inflation calculated on October 2 was more than 56,000 percent. If we look at the average volatility calculated thirty days prior, it increases at the same time.</p>
<p>This runaway inflation is the other side of the coin of the exponential increase of the price of the Venezuelan bolivar in terms of dollars (VEF/USD) as measured by the movement of the exchange rate between the bolívar in terms of Bitcoin and the dollar in terms of Bitcoin. If we analyze the inverse of the exchange rate, we can see how the bolivar has lost more than 99 percent of its purchasing power against the dollar in a matter of a few years.</p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV2.png?itok=_05_j2jF" title="HV2.png" class="colorbox" data-colorbox-gallery="gallery-file-78495-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV2.png?itok=mh_i7RPC" width="693" height="416" alt="HV2.png" title="" /></a></div><div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV3.jpg?itok=FPmifsDy" title="HV3.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78496-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV3.jpg?itok=lE1BpCtt" width="693" height="416" alt="HV3.jpg" title="" /></a></div>
<p> </p>
<p>The creation of new denominations of the Venezuelan currency and the new monetary cone do not seem to have helped abate inflation and will probably not do so in the future.</p>
<p>On August 20, the new monetary cone, the bolivar soberano, came into circulation at an exchange rate of 100,000 bolivares fuerte (Bs.F) for every bolivar soberano (Bs.S).<a class="see-footnote" id="footnoteref1_2709zeg" title="Gaceta Oficial N° 41.460. Dated August 14, 2018." href="#footnote1_2709zeg">1</a></p>
<p>Even though the money supply has multiplied by 100,000, the great inflation that this country has suffered has caused its real stock of money to fall by a factor of eight in the last seven years. Currently, there are $500 million worth of bolivars in circulation, compared to the $4,000 million that were circulating at the end of 2010. The fall in the stock of money is a typical effect of hyperinflations.<a class="see-footnote" id="footnoteref2_khwjg1s" title="Monetary Regimes and Inflation, Edward Elgar Publishing” Peter Bernholz (2015)." href="#footnote2_khwjg1s">2</a></p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV4.jpg?itok=89BGju0h" title="HV4.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78497-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV4.jpg?itok=Rg5FwTGe" width="693" height="416" alt="HV4.jpg" title="" /></a></div>
<p>If we look at the monetary aggregates M0 and M2, we can see that they have had an exponential expansion. The quantitative theory of money would indicate that this large monetary issue would be the cause of the hyperinflation that Venezuela is experiencing.</p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV5.png?itok=tHL7QvHR" title="HV5.png" class="colorbox" data-colorbox-gallery="gallery-file-78498-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV5.png?itok=DQ7ZgLFX" width="693" height="416" alt="HV5.png" title="" /></a></div>The money multiplier (M2/M0) has plummeted during the last few years. This indicates that the broader money supply measured as M2, is converging toward the <a>monetary base</a> (M0). This has caused a liquidity crisis. Almost all liquidity (95 percent) is in electronic money (demand deposits and transferable deposits). Only a small part of the money supply (5 percent) is physical.
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV5_0.png?itok=eh2YT_zr" title="HV5.png" class="colorbox" data-colorbox-gallery="gallery-file-78499-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV5_0.png?itok=1ZDbrP7O" width="693" height="416" alt="HV5_0.png" title="" /></a></div>
<p>Because there are not enough bills in circulation, the price of products paid for in cash can be up to four times lower than if they are paid for by transferring demand deposits. Because of the lack of cash, banks have been forced to introduce a bank freeze (<em>corralito</em>) in which only 10 Bs.S per person per day can be retrieved from an ATM or a bank account. Furthermore, because of a lack of payment terminals and because almost all payments are made by <a>debit</a> card, large lines form in <a>retail</a> establishments.</p>
<p>Despite the enormous wealth of this oil-producing country, the fall in the price of crude oil, the drop in production, and the great expense of the social programs it has implemented throughout the years have caused it to move from a trade surplus to a trade deficit of 30 percent in 2017, according to IMF estimates.</p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV6.jpg?itok=LSZsBko8" title="HV6.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78500-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV6.jpg?itok=F2vDYJwC" width="693" height="416" alt="HV6.jpg" title="" /></a></div>
<p>Part of this deficit has been financed through international reserves, which have been shrinking alarmingly for years, as can be seen in the graph.</p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV7.jpg?itok=RcBLIkTn" title="HV7.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78502-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV7.jpg?itok=9641nQTP" width="693" height="416" alt="HV7.jpg" title="" /></a></div>
<p>Can we be sure that the large issuance of money along with the stock of international reserves is what has been used to pay the country’s trade deficit? Everything seems to indicate so. If we use Peter Bernholz’s model, we can see that the correlation is almost perfect (see graph below).<a class="see-footnote" id="footnoteref3_dyioxnp" title="“Currency Competition, Inflation, Gresham's Law and Exchange Rate,” Journal of Institutional and Theoretical Economics Vol. 145, No. 3 (September 1989), pp. 465-488, Peter Bernholz. " href="#footnote3_dyioxnp">3</a></p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/HV8.jpg?itok=pga0bwst" title="HV8.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78501-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/HV8.jpg?itok=Lp0PEWEu" width="693" height="416" alt="HV8.jpg" title="" /></a></div>
<p>We use a logarithmic scale to better visualize the data. The <a>coefficient of determination R<sup>2</sup></a> and the slope of the linear regression line were obtained before applying the logarithmic transformation. The equation Ṁ=wṘ+Ḋ expresses that the variation of international reserves (Ṙ) converted according to the exchange rate (w) into Bs. and added to the variation of the deficit (Ḋ), is equal to the monetary variation (Ṁ). In other words, the equation indicates whether the increase in a country’s stock of money and its change in international reserves—presumably negative—has been used to pay the trade deficits that are incurred each year. This matches almost perfectly with the annual data we have. Therefore, we can conclude that the increase in the stock of money and the decrease in Venezuela’s international reserves have been used almost completely to pay the <a>trade </a>deficit generated by the government.</p>
<p>The future of the country is more than black. International reserves will be depleted, the monetary expansion will not serve to pay the deficit, and inflation will continue to rise. In the future, Venezuela must obey the fundamental laws of economics. The damage has been high: it has provoked the <a>Bolivarian </a>Revolution, the Chávez-Maduro regime, the worst crisis in the history of the country, and the <a href="https://www.economist.com/graphic-detail/2018/08/20/the-exodus-from-venezuela-threatens-to-descend-into-chaos">largest migratory movement</a> in the history of the American continent.</p>
<div><div><h6 id="_com_1" uage="JavaScript"><em>Originally published at <a href="https://trends.ufm.edu/en/article/venezuela-hyperinflation-now-what/">UFM Market Trends</a></em></h6></div></div>
<ul class="footnotes"><li class="footnote" id="footnote1_2709zeg"><a class="footnote-label" href="#footnoteref1_2709zeg">1.</a> Gaceta Oficial N° 41.460. Dated August 14, 2018.</li>
<li class="footnote" id="footnote2_khwjg1s"><a class="footnote-label" href="#footnoteref2_khwjg1s">2.</a> Monetary Regimes and Inflation, Edward Elgar Publishing” Peter Bernholz (2015).</li>
<li class="footnote" id="footnote3_dyioxnp"><a class="footnote-label" href="#footnoteref3_dyioxnp">3.</a> “Currency Competition, Inflation, Gresham's Law and Exchange Rate,” <em>Journal of Institutional and Theoretical Economics</em> Vol. 145, No. 3 (September 1989), pp. 465-488, Peter Bernholz. </li>
</ul>Jon Aldekoa<img typeof="foaf:Image" src="https://mises.org/system/files/styles/slideshow/private/GettyImages-820793718.jpg?itok=gWMmA0wM" width="240" alt="GettyImages-820793718.jpg" />44690November 15, 2018 - 11:00 AMFront page feedHow to Solve the Social Media De-Platforming Problemhttps://mises.org/node/44696
<p>Is enacting anti-discrimination legislation the answer to social media de-platforming?</p>
<p>Many right-wing commentators are justifiably concerned about social media censorship of controversial content creators. Unfortunately, they advocate for <a href="https://mises.org/wire/ann-coulter-comes-out-favor-anti-discrimination-laws"> state-based solutions </a> promoting equal access and anti-discrimination measures. Ironically, these conservative pleas are calling cards of the political Left. The reflexive impulse to turn to the State may seem like a quick fix in the short-term. Government interventions, however, always have nasty implications decades after passage.</p>
<p>Unbeknownst to them, these well-intentioned conservatives are playing into the State’s hands. Once in power, there is nothing to keep leftist bureaucrats from using a new free speech bureaucracy for their own political ends. In order to solve this riddle, we must first understand that Big Tech’s behavior is not the product of spontaneous actions on the free market. In fact, it is the result of the U.S.’s overly politicized economy.</p>
<h4><strong>Recognizing the Enemy: Participatory Fascism</strong></h4>
<p>For starters, we must recognize that the current tech environment is not operating under a free market. There is plenty of government privilege being spread around.</p>
<p>Big Tech’s relationship with the State is Exhibit A of <em>participatory fascism</em>—the public-private smorgasbord of government interference and nominal private ownership of property. Economist Robert Higgs <a href="http://blog.independent.org/2012/10/30/once-more-with-feeling-our-system-is-not-socialism-but-participatory-fascism/"> expands </a> upon the concept of participatory fascism:</p>
<blockquote><p>For thirty years or so, I have used the term <a href="http://www.independent.org/store/book.asp?id=15"> “participatory fascism,” </a> which I borrowed from my old friend and former Ph.D. student Charlotte Twight. This is a descriptively precise term in that it recognizes the fascistic organization of resource ownership and control in our system, despite the preservation of nominal private ownership, and the variety of ways in which the state employs political ceremonies, proceedings, and engagements—most important, voting—in which the general public participates.</p></blockquote>
<p>In the case of Big Tech, it’s clear the State does not own the means of production, but it does exercise indirect pressure through threats to fine companies or pass draconian laws. Unfortunately, many on the right wing overlook this and fall for the siren song of government control.</p>
<p>The State’s perverse incentives also stretch into matters of platform liability. In his article, <em> <a href="https://original.antiwar.com/justin/2018/08/08/challenging-the-lords-of-the-internet/"> Challenging the Lords of the Internet </a> </em> , Justin Raimondo goes into how the Federal Communications Decency Act shields social media platforms from potential torts. By claiming to be “carriers,” many of these social media giants can’t be held liable for defamation, libel, or criminal activities taking place on their platforms. This creates a two-tiered system where Big Tech enjoys cartel-like privileges, and other traditional publishers like Antiwar.com or Mises can still be held liable or criminally responsible for illegal activities allegedly taking place on these sites.</p>
<p>A blogger, Bionic Mosquito, <a href="https://www.lewrockwell.com/2018/09/bionic-mosquito/dealing-with-the-spaces-in-between/"> piggybacks </a> off of Raimondo’s points:</p>
<blockquote><p>Raimondo goes on to discuss the other unique protections offered by the government to these platforms – protections not available to sites like his own. Protections that are offered to a common carrier, like the phone company, which are not liable for the content that passes over their lines or networks.</p>
<p>These social media internet firms are sheltered from liability regarding the content – just as if they were common carriers. Yet, unlike common carriers, they are allowed to (and now, under threat by the government, <em>required to</em>) censor content. But they are not liable for the content that they censor, nor are they liable for the content that they allow. How is this the free market? Is this typical for private property? Heads I win, tails you lose.</p>
<p>A private company may censor content and also be liable for its decisions. Do these social media platforms really fit the definition of a private company? I would say that Raimondo nailed the point that these companies do not qualify as private property.</p></blockquote>
<p>The privileges Big Tech enjoys are real, and are not the product of a free market. Facebook’s partnership with government-backed think tanks like the <a href="http://www.ronpaulinstitute.org/archives/featured-articles/2018/august/13/why-does-facebook-use-nato-to-help-censor-users/http:/www.ronpaulinstitute.org/archives/featured-articles/2018/august/13/why-does-facebook-use-nato-to-help-censor-users/"> Atlantic Council </a> and Silicon Valley’s cozy relationship with the <a href="https://www.nytimes.com/2018/10/26/opinion/amazon-bezos-pentagon-hq2.html?smtyp=cur&smid=tw-nytopinion"> military-industrial complex </a> are lurid illustrations of how Silicon Valley has <a href="https://mises.org/library/dr-peter-klein-silicon-valley-socialism"> deviated </a> from its relatively free market origins.</p>
<h4><strong>The Solution is Still Free Markets</strong></h4>
<p>To solve the issue of de-platforming, we would ideally have a separation of economy and State. That means a repeal of the Communications Decency Act, no regulation of so-called hate speech on the Internet, and less government barriers to entry. A daunting set of tasks indeed.</p>
<p>On a more positive note, there are 21<sup>st</sup> century tools available to help content creators maneuver their way out of Big Tech’s censorship mine field.</p>
<p>Email marketing and <a href="https://www.garyvaynerchuk.com/5-strategies-for-personal-branding-online/"> personal branding </a> are providing individuals new outlets to earn a living online. Thanks to these innovations, individuals can make money anywhere in the world. Better yet, people now have the ability to make money without having to deal with politically correct bosses or government censors. Libertarian content creators like Tom Woods have mastered <a href="https://tomwoods.com/bonus-ep-760-mastering-email-the-quickest-way-to-get-an-advantage-over-your-competitors/"> email marketing </a> to build their own brands online without government funding or having to rely on politically correct corporations for a paycheck.</p>
<p>In a similar vein, alternative social media platforms like <a href="https://gab.ai/">Gab</a> have emerged to fulfill the desire for a censorship-free social media platform. That being said, Gab does face considerable challenges in overcoming the <a href="https://en.wikipedia.org/wiki/Network_effect">network effects</a> other established platforms like Facebook and Twitter have enjoyed. It also doesn’t help that businesses like payment processor Paypal and hosting company Joyent are <a href="https://www.theverge.com/2018/10/28/18034126/gab-social-network-stripe-joyent-deplatforming-hate-speech-pittsburgh-shooting"> breaking ties </a> with Gab.</p>
<p>But not all is doom and gloom. Certain payment protocols like the <a href="https://lightning.network/">Lightning Network</a> allow users to <a href="https://medium.com/@lightcoin/deplatformed-3d3226b63a3c"> conduct transactions </a> without fear of government interference or being cut off by traditional payment processors like Paypal. In the same token, decentralized storage systems like <a href="https://github.com/blockstack/gaia">Gaia</a> facilitate the hosting of content in a way that is free from government censors’ grasp and corporations’ PC agenda.</p>
<h4><strong>It’s the State Stupid</strong></h4>
<p>The key is that the State not be involved in social media in the first place. In fact, the State is arguably the biggest obstacle in preventing the arrival of Big Tech’s next competitor. This is not a discussion about what platform is going to be the “next Facebook”. What we should really be talking about is a wholesale upgrade to the current social media market. Ideally, this upgrade would come with decentralized features.</p>
<p>The future is decentralized and if we want to speed up this process, the State must butt out of our economic activities.</p>
José Niño<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/soc_media.PNG?itok=fg1XyDCm" width="240" alt="soc_media.PNG" />44696November 15, 2018 - 6:00 AMFront page feedThe Brutality of Slaveryhttps://mises.org/node/44734
<p>In a slave system, threats of brutality underlay the whole relationship.</p>
<p>Narrated by Floy Lilley. <a href="https://mises.org/library/brutality-slavery" target="_blank">This article</a> is excerpted from <em>Conceived in Liberty</em>, Volume 1, Chapter 6, "The Social Structure of Virginia: Bondservants and Slaves".</p>
Murray N. Rothbard<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/AudioMisesWire_750x516_20180223.jpg?itok=5JRlqpkV" width="240" alt="Audio Mises Wire" title="Audio Mises Wire" />44734November 14, 2018 - 4:00 PMFront page feedThe Brutality of Slaveryhttps://mises.org/node/6449
<p>[This article is excerpted from <a href="http://mises.org/document/3006"><i>Conceived in Liberty</i></a>, volume 1, chapter 6, "The Social Structure of Virginia: Bondservants and Slaves". An MP3 audio file of this article, narrated by Floy Lilley, is <a href="http://mises.org/media/2356/6-The-Social-Structure-of-Virginia-Bondservants-and-Slaves">available for download</a>.]</p>
<p>Until the 1670s, the bulk of forced labor in Virginia was indentured service (largely white, but some Negro); Negro slavery was negligible. In 1683 there were 12,000 indentured servants in Virginia and only 3,000 slaves of a total population of 44,000. Masters generally preferred bondservants for two reasons. First, they could exploit the bondservants more ruthlessly because they did not <i>own</i> them permanently, as they did their slaves; on the other hand, the slaves were completely their owners’ capital and hence the masters were economically compelled to try to preserve the capital value of their human tools of production. Second, the bondservants, looking forward to their freedom, could be more productive laborers than the slaves, who were deprived of all hope for the future.</p>
<p>As the colony grew, the number of bondservants grew also, although as servants were repeatedly set free, their proportion to the population of Virginia declined. Since the service was temporary, a large new supply had to be continually furnished. There were seven sources of bondservice, two voluntary (initially) and five compulsory. The former consisted partly of “redemptioners” who bound themselves for four to seven years, in return for their passage money to America. It is estimated that seventy percent of all immigration in the colonies throughout the colonial era consisted of redemptioners. The other voluntary category consisted of apprentices, children of the English poor, who were bound out until the age of twenty-one. In the compulsory category were: (a) impoverished and orphaned English children shipped to the colonies by the English government; (b) colonists bound to service in lieu of imprisonment for debt (the universal punishment for all nonpayment in that period); (c) colonial criminals who were simply farmed out by the authorities to the mastership of private employers; (d) poor English children or adults kidnapped by professional “crimps”—one of whom boasted of seizing 500 children annually for a dozen years; and (e) British convicts choosing servitude in America for seven to fourteen years in lieu of all prison terms in England. The last were usually petty thieves or political prisoners—and Virginia absorbed a large portion of the transported criminals.</p>
<p>As an example of the grounds for deporting political prisoners into bondage, an English law in force in the mid-1660s banished to the colonies anyone convicted three times of attempting an unlawful meeting—a law aimed mostly at the Quakers. Hundreds of Scottish nationalist rebels, particularly after the Scottish uprising of 1679, were shipped to the colonies as political criminals. An act of 1670 banished to the colonies anyone with knowledge of illegal religious or political activity, who refused to turn informer for the government.</p>
<p>During his term of bondage, the indentured servant received no monetary payment. His hours and conditions of work were set absolutely by the will of his master who punished the servant at his own discretion. Flight from the master’s service was punishable by beating, or by doubling or tripling the term of indenture. The bondservants were frequently beaten, branded, chained to their work, and tortured. The frequent maltreatment of bondservants is so indicated in a corrective Virginia act of 1662: “The barbarous usage of some servants by cruel masters being so much scandal and infamy to the country... that people who would willingly adventure themselves hither, are through fears thereof diverted”—thus diminishing the needed supply of indentured servants.</p>
<p>Many of the oppressed servants were moved to the length of open resistance. The major form of resistance was flight, either individually or in groups; this spurred their employers to search for them by various means, including newspaper advertisements. Work stoppages were also employed as a method of struggle. But more vigorous rebellions also occurred especially in Virginia in 1659, 1661, 1663, and 1681. Rebellions of servants were particularly pressing in the 1660s because of the particularly large number of political prisoners taken in England during that decade. Independent and rebellious by nature, these men had been shipped to the colonies as bondservants. Stringent laws were passed in the 1660s against runaway servants striving to gain their freedom.</p>
<p>In all cases, the servant revolts for freedom were totally crushed and the leaders executed. Demands of the rebelling servants ranged from improved conditions and better food to outright freedom. The leading example was the servant uprising of 1661 in York County, Virginia, led by Isaac Friend and William Clutton. Friend had exhorted the other servants that “he would be the first and lead them and cry as they went along <i>who would be for liberty and freed from bondage</i> and that there would be enough come to them, and they would go through the country and kill those who made any opposition and that they would either be free or die for it.”<a class="see-footnote" id="footnoteref1_e9imqon" title="Abbot E. Smith, Colonists in Bondage." href="#footnote1_e9imqon">1</a> The rebels were treated with surprising leniency by the county court, but this unwonted spirit quickly evaporated with another servant uprising in 1663.</p>
<p>This servant rebellion in York, Middlesex, and Gloucester counties was betrayed by a servant named Birkenhead, who was rewarded for his renegacy by the House of Burgesses with his freedom and 5,000 pounds of tobacco. The rebel leaders, however,—former soldiers under Cromwell—were ruthlessly treated; nine were indicted for high treason and four actually executed. In 1672 a servant plot to gain freedom was uncovered and a Katherine Nugent suffered thirty lashes for complicity. A law was passed forbidding servants from leaving home without special permits and meetings of servants were further repressed.</p>
<p>One of the first servant rebellions occurred in the neighboring Chesapeake tobacco colony of Maryland. In 1644 Edward Robinson and two brothers were convicted for armed rebellion for the purpose of liberating bondservants. Thirteen years later Robert Chessick, a recaptured runaway servant in Maryland, persuaded several servants of various masters to run away to the Swedish settlements on the Delaware River. Chessick and a dozen other servants seized a master’s boat, as well as arms for self-defense in case of attempted capture. But the men were captured and Chessick was given thirty lashes. As a special refinement, one of Chessick’s friends and abettors in the escape, John Beale, was forced to perform the whipping.</p>
<p>In 1663 the bondservants of Richard Preston of Maryland went on strike and refused to work in protest against the lack of meat. The Maryland court sentenced the six disobedient servants to thirty lashes each, with two of the most moderate rebels compelled to perform the whipping. Facing <i>force majeure,</i> all the servants abased themselves and begged forgiveness from their master and from the court, which suspended the sentence on good behavior.</p>
<p>In Virginia a servant rebellion against a master, Captain Sisbey, occurred as early as 1638; the lower Norfolk court ordered the enormous total of one hundred lashes on each rebel. In 1640 six servants of Captain William Pierce tried to escape to the Dutch settlements. The runaways were apprehended and brutally punished, lest this set “a dangerous precedent for the future time.” The prisoners were sentenced to be whipped and branded, to work in shackles, and to have their terms of bondage extended.</p>
<p>By the late seventeenth century the supply of bondservants began to dry up. While the opening of new colonies and wider settlements increased the <i>demand</i> for bondservants, the <i>supply</i> dwindled greatly as the English government finally cracked down on the organized practice of kidnapping and on the shipping of convicts to the colonies. And so the planters turned to the import and purchase of Negro slaves. In Virginia there had been 50 Negroes, the bulk of them slaves, out of a total population of 2,500 in 1630; 950 Negroes out of 27,000 in 1660; and 3,000 Negroes out of 44,000 in 1680—a steadily rising proportion, but still limited to less than seven percent of the population. But in ten years, by 1690, the proportion of Negroes had jumped to over 9,000 out of 53,000, approximately seventeen percent. And by 1700, the number was 16,000 out of a population of 58,000, approximately twenty-eight percent. And of the total <i>labor force</i>—the working population—this undoubtedly reflected a considerably higher proportion of Negroes.</p>
<p>How the Negro slaves were treated may be gauged by the diary of the aforementioned William Byrd II, who felt himself to be a kindly master and often inveighed against “brutes who mistreat their slaves.” Typical examples of this kindly treatment were entered in his diary:</p>
<blockquote><p class="hang1" style="margin-top:30px;">2-8-09: Jenny and Eugene were whipped.</p>
<p class="hang1">5-13-09: Mrs. Byrd whips the nurse.</p>
<p class="hang1">6-10-09: Eugene (a child) was whipped for running away and had the bit put on him.</p>
<p class="hang1">11-30-09: Jenny and Eugene were whipped.</p>
<p class="hang1">12-16-09: Eugene was whipped for doing nothing yesterday.</p>
<p class="hang1">4-17-10: Byrd helped to investigate slaves tried for “High Treason”; two were hanged.</p>
<p class="hang1">7-1-10: The Negro woman ran away again with the bit in her mouth.</p>
<p class="hang1">7-15-10: My wife, against my will, caused little Jenny to be burned with a hot iron.</p>
<p class="hang1">8-22-10: I had a severe quarrel with little Jenny and beat her too much for which I was sorry.</p>
<p class="hang1">1-22-11: A slave “pretends to be sick.” I put a branding iron on the place he claimed of and put the bit on him.</p></blockquote>
<p>It is pointless to criticize such passages as only selected instances of cruel treatment, counterbalanced by acts of kindness by Byrd and other planters toward their slaves. For the point is not only that the slave system was one where such acts <i>could</i> take place; the point is that <i>threats</i> of brutality underlay the whole relationship. For the essence of slavery is that human beings, with their inherent freedom of will, with individual desires and convictions and purposes, are used as <i>capital,</i> as tools for the benefit of their master. The slave is therefore habitually forced into types and degrees of work that he would not have freely undertaken; by necessity, therefore, the bit and the lash become the motor of the slave system. The myth of the kindly master camouflages the inherent brutality and savagery of the slave system.</p>
<p>One historical myth holds that since the slaves were their masters’ <i>capital,</i> the masters’ economic self-interest dictated kindly treatment of their property. But again, the masters always had to make sure that the property was really <i>theirs,</i> and for this, systematic brutality was needed to turn labor from natural into coerced channels for the benefit of the master. And, second, what of property that had outlived its usefulness? Of capital that no longer promised a return to the master? Of slaves too old or too ill to continue earning their masters a return? What sort of treatment did the economic self-interest of the master dictate for slaves who could no longer repay the costs of their subsistence?</p>
<p>Slaves resisted their plight in many ways, ranging from such nonviolent methods as work slowdowns, feigning illness, and flight, to sabotage, arson, and outright insurrection. Insurrections were always doomed to failure, outnumbered as the slaves were in the population. And yet the slave revolts appeared and reappeared. There were considerable slave plots in Virginia in 1687, 1709–10, 1722–23, and 1730. A joint conspiracy of great numbers of Negro and Indian slaves in Surry and Isle of Wight counties was suppressed in 1709, and another Negro slave conspiracy crushed in Surry County the following year. The slave who betrayed his fellows was granted his freedom by the grateful master. The 1730 uprising occurred in five counties of Virginia, and centered on the town of Williamsburg. A few weeks before the insurrection, several suspected slaves were arrested and whipped. An insurrection was then planned for the future, but was betrayed and the leaders executed.</p>
<p>Joint flight by slaves and servants was also common during the seventeenth century, as well as joint participation in plots and uprisings. In 1663 Negro slaves and white indentured servants in Virginia plotted an extensive revolt, and a number of the rebels were executed. The colonists appointed the day as one of prayer and thanksgiving for being spared the revolt. Neither slave nor indentured servant was permitted to marry without the master’s consent; yet there is record of frequent cohabitation, despite prohibitory laws.</p>
<p>It has been maintained in mitigation of the brutality of the American slave system that the Negroes were <i>purchased</i> from African chieftains, who had enslaved them there. It is true that the slaves were also slaves in Africa, but it is also true that African slavery never envisioned the vast scope, the massive dragooning of forced labor that marked American plantation slavery. Furthermore, the existence of a ready white market for slaves greatly expanded the extent of slavery in Africa, as well as the intensity of the intertribal wars through which slavery came about. As is usually the case on the market, demand stimulated supply. Moreover, African slavery did not include transportation under such monstrous conditions that a large percentage could not survive, or the brutal “seasoning” process in a West Indies way station to make sure that only those fit for slave conditions survived, or the continual deliberate breaking up of slave families that prevailed in the colonies.</p>
<p>From the earliest opening of the New World, African slaves were imported as forced labor to make possible the working of large plantations, which, as we have seen, would have been uneconomic if they had had to rely, as did other producers, on free and voluntary labor. In Latin America, from the sixteenth century on, Negro slavery was used for large sugar plantations concentrated in the West Indies and on the north coast of South America. It has been estimated that a total of 900,000 Negro slaves were imported into the New World in the sixteenth century, and two and three-quarter million in the seventeenth century.<a class="see-footnote" id="footnoteref2_sjj5dm3" title="Over the seventeenth and eighteenth centuries, only about one-fifteenth of the total Negro imports into the New World arrived in the territory of what is now the United States. That the slaves fared even worse in the Latin American colonies is seen by the far higher death rate there than in North America." href="#footnote2_sjj5dm3">2</a></p>
<p>Negroes came into use as slaves instead of the indigenous American Indians because: (a) the Negroes proved more adaptable to the onerous working conditions of slavery—enslaved Indians tended, as in the Caribbean, to die out; (b) it was easier to buy existing slaves from African chieftains than to enslave a race anew; and (c) of the great moral and spiritual influence of Father Bartolome de Las Casas in Spanish America, who in the mid-sixteenth century inveighed against the enslavement of the American Indians. Spanish consciences were never agitated over Negro slavery as they were over Indian; even Las Casas himself owned several Negro slaves for many years. Indeed, early in his career, Las Casas advocated the introduction of Negro slaves to relieve the pressure on the Indians, but he eventually came to repudiate the slavery of both races. In the seventeenth century two Spanish Jesuits, Alonzo de Sandoval and Pedro Claver, were conspicuous in trying to help the Negro slaves, but neither attacked the institution of Negro slavery as un-Christian. Undoubtedly one reason for the different treatment of the two races was the general conviction among Europeans of the inherent inferiority of the Negro race. Thus, the same Montesquieu who had scoffed at those Spaniards who called the American Indians barbarians, suggested that the African Negro was the embodiment of Aristotle’s “natural slave.” And even the environmental determinist David Hume suspected “the Negroes to be naturally inferior to the whites. There scarcely ever was a civilized nation of that complexion, nor even an individual, eminent either in action or speculation. No ingenious manufacturers amongst them, no arts, no sciences. On the other hand, the most rude and barbarian of the whites... have still something eminent about them.... Such a uniform and constant difference could not happen, in so many countries and ages, if nature had not made an original distinction between these breeds of men.”</p>
<p>Contrary to the views of those writers who maintain that Negroes and whites enjoyed equal rights as indentured servants in Virginia until the 1660s, after which the Negroes were gradually enslaved, evidence seems clear that from the beginning many Negroes were slaves and were treated far more harshly than were white indentured servants.<a class="see-footnote" id="footnoteref3_y9i3lc6" title="Cf. Winthrop D. Jordan, “Modern Tensions and the Origins of American Slavery,” Journal of Southern History (February 1962), pp. 17-30." href="#footnote3_y9i3lc6">3</a> No white man, for example, was ever enslaved unto perpetuity—lifetime service for the slave and for his descendants—in any English colony. The fact that there were no slave statutes in Virginia until the 1660s simply reflected the small number of Negroes in the colony before that date.<a class="see-footnote" id="footnoteref4_ua7syl9" title="Ibid. Jordan cites many evidences of Negro slavery—including court sentences, records of Negroes, executions of wills, comparative sale prices of Negro and white servants—dating from 1640, before which time the number of Negroes in Virginia was negligible." href="#footnote4_ua7syl9">4</a> From a very early date, owned Negroes were worked as field hands, whereas white bondservants were spared this onerous labor. And also from an early date, Negroes, in particular, were denied any right to bear arms. An especially striking illustration of this racism pervading Virginia from the earliest days was the harsh prohibition against any sexual union of the races. As early as 1630 a Virginia court ordered “Hugh Davis to be soundly whipped, before an assembly of Negroes and others for abusing himself to the dishonor of God and shame of Christians by defiling his body in lying with a Negro.” By the early 1660s the colonial government outlawed miscegenation and interracial fornication. When Virginia prohibited all interracial unions in 1691, the Assembly bitterly denounced miscegenation as “that abominable mixture and spurious issue.”<a class="see-footnote" id="footnoteref5_qhqufz9" title="“Spurious” in colonial legislation meant not simply illegitimate, but specifically the children of interracial unions." href="#footnote5_qhqufz9">5</a></p>
<p>Other regulations dating from this period and a little later included one that forbade any slave from leaving a plantation without a pass from his master; another decreed that conversion to Christianity would not set a slave free, a fact which violated a European tradition that only heathens, not Christians, might be reduced to slavery.</p>
<p>By the end of the seventeenth century, the growing Virginia colony had emerged from its tiny and precarious beginnings with a definite social structure. This society may be termed partly feudal. On the one hand, Virginia, with its abundance of new land, was spared the complete feudal mold of the English homeland. The Virginia Company was interested in promoting settlement, and most grantees (such as individual settlers and former indentured servants) were interested in settling the land for themselves. As a result, there developed a multitude of independent yeomen settlers, particularly in the less choice up-country lands. Also, the feudal quitrent system never took hold in Virginia. The settlers were charged quitrents by the colony or by the large grantees who, instead of allowing settlers to own the land or selling the land to them, insisted on charging and trying to collect annual quitrents as overlords of the land area. But while Virginia was able to avoid many crucial features of feudalism, it introduced an important feudal feature into its method of distributing land, especially the granting of large tracts of choice tidewater river land to favorite and wealthy planters. These large land grants would have early dissolved into ownership by the individual settlers were it not for the regime of forced labor, which made the large tobacco plantations profitable. Furthermore, the original “settlers,” those who brought the new land into use, were in this case the slaves and bondservants themselves, so it might well be said that the planters were in an arbitrary quasi-feudal relation to their land even apart from the large grants.</p>
<p>Temporary indentured service, both “voluntary” and compulsory, and the more permanent Negro slavery formed the base of exploited labor upon which was erected a structure of oligarchic rule by the large tobacco planters. The continuance of the large land tracts was also buttressed by the totally feudal laws of entail and primogeniture, which obtained, at least formally, in Virginia and most of the other colonies. Primogeniture compelled the undivided passing-on of land to the eldest son, and entail prevented the land from being alienated (even voluntarily) from the family domain. However, primogeniture did not exert its fully restrictive effect, for the planters generally managed to elude it and to divide their estate among their younger children as well. Hence, Virginia land partly dissolved into its natural division as the population grew. Primogeniture and entail never really took hold in Virginia, because the abundance of cheap land made <i>labor</i>—and hence the coerced supply of slaves—the key factor in production. More land could always be acquired; hence there was no need to restrict inheritance to the eldest son. Furthermore, the rapid exhaustion of tobacco land by the current methods of cultivation required the planters to be mobile, and to be ready to strike out after new plantations. The need for such mobility militated against the fixity of landed estates that marked the rigid feudal system of land inheritance prevailing in England. Overall, the wealth and status of Virginia’s large planters was far more precarious and less entrenched that were those of their landowning counterparts in England.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_e9imqon"><a class="footnote-label" href="#footnoteref1_e9imqon">1.</a> Abbot E. Smith, <em>Colonists in Bondage</em>.</li>
<li class="footnote" id="footnote2_sjj5dm3"><a class="footnote-label" href="#footnoteref2_sjj5dm3">2.</a> Over the seventeenth and eighteenth centuries, only about one-fifteenth of the total Negro imports into the New World arrived in the territory of what is now the United States. That the slaves fared even worse in the Latin American colonies is seen by the far higher death rate there than in North America.</li>
<li class="footnote" id="footnote3_y9i3lc6"><a class="footnote-label" href="#footnoteref3_y9i3lc6">3.</a> <em>Cf.</em> Winthrop D. Jordan, “Modern Tensions and the Origins of American Slavery,” <em>Journal of Southern History</em> (February 1962), pp. 17-30.</li>
<li class="footnote" id="footnote4_ua7syl9"><a class="footnote-label" href="#footnoteref4_ua7syl9">4.</a> <em>Ibid</em>. Jordan cites many evidences of Negro slavery—including court sentences, records of Negroes, executions of wills, comparative sale prices of Negro and white servants—dating from 1640, before which time the number of Negroes in Virginia was negligible.</li>
<li class="footnote" id="footnote5_qhqufz9"><a class="footnote-label" href="#footnoteref5_qhqufz9">5.</a> “Spurious” in colonial legislation meant not simply illegitimate, but specifically the children of interracial unions.</li>
</ul>Murray N. Rothbard<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/slavery1.PNG?itok=t22KdYPA" width="240" alt="slavery1.PNG" />6449November 14, 2018 - 2:00 PMFront page feedCoffee Sellers Are Not Fundamentally Different from Bankshttps://mises.org/node/44697
<p>With the 2007-8 financial crisis came a splendid alphabetical soup of central bank interventions to stimulate financial markets, lower interest rates, provide astonishing amounts of liquidity to banks and, allegedly, prevent another Great Depression. Likening <a href="https://www.wsj.com/articles/SB124865498517982625"> the failure of big banks to falling elephants crushing even the smallest grass</a>, former Fed Chairman Bernanke argued that consequences from bank failures would have caused much more havoc to the economy than the liquidity provision and bailouts his Fed oversaw.</p>
<p>Now, do banks really deserve special consideration in this sense? Let me illustrate by comparing the fates of two imaginary entrepreneurs:</p>
<p>Our first entrepreneur — let’s call him John — sees an opportunity in the beverage business. Specifically, he’s convinced that he can source high-quality Brazilian coffee beans, roast and serve impeccably aromatic coffee in downtown Manhattan. He draws up the business plan, estimates what he believes coffee-craving New Yorkers would be willing to pay for his coffee and assesses how many customers he could reasonably serve per day.</p>
<p>Setting his plan in action, he borrows some money from friends and family, rents an appropriate space, hires a construction team and interior designers to create the coffee-scented heaven he imagines, finds some competent baristas to staff it and finally opens his doors to hesitantly curious customers. From here, as in all entrepreneurial ventures, there are two paths John’s business may take:</p>
<ol><li><em>If customers love his coffee and willingly part with their dollars</em> , enough so that John can cover costs as well as offer some return to his shareholders/creditors, we consider John’s venture successful. The profits describe the added value for consumers, regardless of whether you see John as a <a href="https://mises.org/wire/klein-versus-kirzner"> Misesian uncertainty-carrying and future-appreciating speculator </a> or a <a href="https://mises.org/wire/klein-versus-kirzner"> Kirznerian arbitrageur, alert to discrepancies </a> between prices of higher and lower-order goods.</li><li><em>If customers scoff at his atrocious coffee-like concoction, </em>and refuse to buy drinks in the amounts John estimated, we consider John’s venture unsuccessful. The losses he is bound to incur similarly describe the (negative) value his venture created by combining scarce producer goods into <em>less</em>-valuable consumer goods.</li></ol><p>When John, under the second scenario, closes up shop, fire-sells his remaining inventory at prices far below those at which he bought them, defaults on his loans and outstanding rent obligations to his landlord, there are losses all around. His creditors lost the money they invested; the property owner lost the remaining unpaid rent, and the wholesale provider of coffee beans might not see his last invoice paid in full. We may call them and other losses externalities. Losses may bankrupt John’s suppliers. For example, John's failed venture might drive other entrepreneurs out of business by ending their access to an important customer.) But we accept them as part of the creative flux of markets where profits and losses indicate consumer valuations, validating the entrepreneur’s prior and speculative actions. Even if these losses would be huge (say the wholesaler of coffee beans goes bankrupt and all her employees lose their jobs), we lament their personal fates, but don’t call for government to subsidize John, keep the wholesaler from bankruptcy, or provide liquidity so they can stay in business.</p>
<p>Enter our second entrepreneur — Jane. Jane is somewhat more financially savvy and spots an underappreciated opportunity in an entirely different market. Majoring in finance, she knows that the <a href="https://www.investopedia.com/terms/y/yieldcurve.asp"> yield curve </a> (the difference in <a href="https://mpra.ub.uni-muenchen.de/79592/1/MPRA_paper_79592.pdf"> yields between bonds of long maturity and bonds of short maturity</a>) is generally upward-sloping. For a variety of reasons investors require a <em> <a href="https://www.bloomberg.com/news/articles/2017-10-30/what-s-a-term-premium-and-where-did-mine-go-quicktake-q-a"> term premium for holding long-dated debt</a></em>. Jane knows this, but believes that the input prices of her proposed business are still undervalued: she raises a sizable amount of money, offers slightly better short-term rates than prevailing in the market — by overbidding other entrepreneurs gains access to an even larger pool of funds — combines it all into an efficiently-staffed office with the latest credit-rating models and starts offering long-term loans to home-owners at attractive rates.</p>
<p>Careful not to make John’s mistake in his second scenario, she ensures that the margins between her input costs (what she pays her investors and wholesale funders in interest) and output prices (the annual interest rates she earns from her large and suitably diversified portfolio of mortgage lending) are markedly positive, earning a serious amount of income for herself and her shareholders.</p>
<p>Even though she is aware of the liquidity risk she incurs (“My clients won’t pay me back for a very long time: what happens if I can’t repay – roll over – my 3-month wholesale funding?”), she judges it a minor worry and decides not to take out any kind of interest-rate hedges or liquidity insurance. She’s confident that her initial disbelief at other market actors’ pricing is incorrect. In any case, she can always find new short-term funding at suitable rates should some of her funders refuse to roll over their loans.</p>
<p>At this point, let’s briefly summarize our two entrepreneurs: they both entrepreneurially speculated on an uncertain future, believing they could provide a product (coffee or loans) at certain prices above their cost of operation (office, overhead, employees) plus their input costs (coffee-beans wholesale or wholesale funding). The economic analysis, similarly, is no different: profit-and-loss statements indicate whether John and Jane serve their customers well, adding value through their business ventures. That’s also where the comparison allegedly ends.</p>
<p>For where John’s mistaken entrepreneurial decisions over coffee preferences, wholesale prices and consumers’ willingness to pay warrant no particular attention from governments, central banks and economists, Jane’s case is, for some unfathomable reason, entirely different.</p>
<p>When Jane one day wakes up to wholesalers refusing to rollover her funding and she’s <em>urgently</em> in need of liquid assets to pay the debt that’s falling due, the trust in profit-and-loss statements for revealing consumer value creation is entirely absent. Calls for alphabet-soup government agencies are heard from central bank offices to Treasury departments and <em>New York Times</em> columns: fire-selling Jane’s remaining assets (mortgage loans) at low prices will bankrupt her, not to mention all other Jane-like ventures that hold similar assets, creating a devastating downward spiral. Jane’s business is simply too important to go bankrupt. Letting her successful banking business go under would be catastrophic for all her employees, clients, suppliers as well as for the financial system.</p>
<p>The analytical mistake in arguing for public assistance to Jane — but not John — seems obvious, but well-read economists might still disagree, offering versions of the three following arguments:</p>
<ol><li>Jane’s business is solvent but <em>illiquid</em>, whereas John’s coffee store is insolvent.</li><li>There is an externality aspect to Jane’s business model not present in John’s; when Jane’s assets are liquidated, the prices of <em>all other</em> such assets are likely to fall, thus hurting anyone who hold them, including innocent third parties.</li><li>Jane’s employees have unique information about her clients; she knows their creditworthiness better than anyone, even other banks. Part of the value she creates is unique to her firm and cannot be sold as easily as the title to the assets she’s holding. Since this information is socially valuable, letting Jane’s bank fail would amount to a societal loss.</li></ol><p>All of these claims are mistaken. First, like all banks, Jane’s business <em>is</em> to manage liquidity. Banks’ business model, in addition to appropriately evaluate clients’ creditworthiness, is to correctly manage the maturity transformation they are engaged in. The amount of liquidity risk a financial institution takes on <em>is part of its entrepreneurial decision</em>; it is not an accidental exogenous event as most of the banking literature seems to believe. Heavily exploiting the yield curve, earning hefty interest rate margins between illiquid long-dated assets and liquid short-term liabilities <em>without</em> (costly) risk-mitigating interest rate hedges, is no different from high entrepreneurial risk-taking in other industries.</p>
<p>The second reason equally applies for John: when he sells his left-over coffee inventory he greatly depresses the going market price of unused coffee beans, threatening all other wholesalers of coffee beans with bankruptcy; should John’s supply be large enough and the market for coffee beans thin enough, he could be depressing the prices for longer than those suppliers can stay in business. In the exact same way Jane’s fire-selling threatens other businesses “<a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.189.1320&rep=rep1&type=pdf">through no fault of their own</a>,” John’s liquidation depresses prices for others, threatening their businesses. There is, in other words, no special reason why banks deserve public support for their business models when coffee stores do not.</p>
<p>As for the third objection, John’s coffee bean store also has particular enterprise-unique information; his baristas knows which variety of coffees their regular customers want. A new coffee store may only imperfectly replace the detailed and intricate coffee desires John satisfied. The fact that John’s store could not cover its costs is evidence enough that this unique knowledge was not <em>sufficiently</em> valuable.</p>
<p>In sum, banking and banks’ liquidity are not subject to <em>other</em> economic laws than are coffee stores, and they should not be given special consideration.</p>
Joakim Book<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/coffee1.PNG?itok=tjfB9HjW" width="240" alt="coffee1.PNG" />44697November 14, 2018 - 11:00 AMFront page feedSorry, Stiglitz: It’s Socialism That’s Rigged — not Capitalismhttps://mises.org/node/44694
<p>Ever since winning the Nobel Memorial Prize in “Economic Science” in 2001, Joseph Stiglitz has been a one-man advocacy band for growth of the state. After 9/11, for example, he called for the formation of a federal agency to provide security for airline passengers, which he claimed would send a “signal” for quality. (<a href="https://en.wikipedia.org/wiki/Joseph_Stiglitz">Stiglitz won his prize for “proving” that free markets are “inefficient” </a> and always result in less-than-optimal outcomes because of asymmetric information. Only government in the hands of Really Smart People like Stiglitz can direct production and exchange consistently to efficient and “just” results.)</p>
<p>More than a decade ago, <a href="https://venezuelanalysis.com/news/2719"> Stiglitz lavished praise for the socialist government </a> of the late Hugo Chavez in Venezuela, declaring:</p>
<blockquote><p>Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the country’s oil wealth.</p></blockquote>
<p>He went on to claim that the Chavez policies of expropriating the capital structure of private oil companies in Venezuela would result in a more “equal” distribution of wealth in that country, something he believes is desirable everywhere. Interestingly, <a href="https://www.nbcnews.com/think/opinion/venezuela-verge-massive-humanitarian-economic-collapse-culprit-socialism-ncna899461"> since Venezuela’s socialist “experiment” went south</a>, complete with hyperinflation and one of the worst financial and economic crises ever seen in the Western Hemisphere, <a href="https://www.city-journal.org/joseph-stiglitz-venezuela-16181.html"> Stiglitz has been silent</a>, at least when it comes to explaining why the <a href="https://www.salon.com/2013/03/06/hugo_chavezs_economic_miracle/"> so-called economic miracle in Venezuela </a> was unsustainable.</p>
<p>Although Stigliz no longer is lavishing praise on Venezuelan socialism, he hardly is silent about his belief that only expanded state power can “save” the U.S. economy from self-destruction. In a <a href="https://www.scientificamerican.com/article/the-american-economy-is-rigged/?fbclid=IwAR3yWocghkh_7-4ePok4df9Yy4NG_w8AxsPnKBQQRFCrqsY_Yma8fHu-Ibw"> recent article in <em>Scientific American</em>, he declares </a> that “The American Economy is Rigged.” However, he adds in the title, “And what we can do about it.”</p>
<p>Those familiar with the public declarations of Stiglitz, Paul Krugman, and others in the “markets are internally destructive” camp, nothing Stiglitz writes in the article is surprising. For that matter, it is pure Stiglitz to have it in <em>Scientific American</em>, since he can claim he is engaged in scientific discourse, something <a href="https://www.city-journal.org/joseph-stiglitz-venezuela-16181.html"> he can prove with a lot of mathematical equations that “prove” free markets are bad </a> :</p>
<blockquote><p>From Stiglitz’s perspective, markets are rife with failure in processing and conveying information, and government must be ready to correct these failures. In his Nobel lecture, Stiglitz spoke of having “undermined” the free-market theories of Adam Smith, asserting that Smith’s “invisible hand” either didn’t exist or had grown “palsied.” He noted that major political debates over the past two decades have tended to focus on the “efficiency of the market economy” and the “appropriate relationship between the market and the government.” His approach favored government.</p></blockquote>
<p>Furthermore, he declared in his Nobel lecture that “<em>perfect</em> competition is required if markets are to be efficient” (italics his). To Austrian economists, his statement raises the question as to why we are to assume that governments somehow possess the necessary information to produce “efficient” outcomes in economic exchanges, but Stiglitz never has tried to go there. He simply assumes governmental superiority regarding information and then runs with that assumption.</p>
<p>Stiglitz’s latest article lays out the theme that markets <em>systematically</em> produce inequality, and that over time we are faced with the situation in which only a privileged few people benefit from the capitalist system while the vast majority slip into the economic abyss. He writes:</p>
<blockquote><p>In his celebrated 2013 treatise <em>Capital in the Twenty-First Century</em>, French economist Thomas Piketty shifts the gaze to capitalists. He suggests that the few who own much of a country's capital save so much that, given the stable and high return to capital (relative to the growth rate of the economy), their share of the national income has been increasing. His theory has, however, been questioned on many grounds. For instance, the savings rate of even the rich in the U.S. is so low, compared with the rich in other countries, that the increase in inequality should be lower here, not greater.</p>
<p>An alternative theory is far more consonant with the facts. Since the mid-1970s the rules of the economic game have been rewritten, both globally and nationally, in ways that advantage the rich and disadvantage the rest. And they have been rewritten further in this perverse direction in the U.S. than in other developed countries—even though the rules in the U.S. were already less favorable to workers. From this perspective, increasing inequality is a matter of choice: a consequence of our policies, laws and regulations.</p>
<p>In the U.S., the market power of large corporations, which was greater than in most other advanced countries to begin with, has increased even more than elsewhere. On the other hand, the market power of workers, which started out less than in most other advanced countries, has fallen further than elsewhere. This is not only because of the shift to a service-sector economy—it is because of the rigged rules of the game, rules set in a political system that is itself rigged through gerrymandering, voter suppression and the influence of money. A vicious spiral has formed: economic inequality translates into political inequality, which leads to rules that favor the wealthy, which in turn reinforces economic inequality.</p></blockquote>
<p>All of this results in what he calls a “feedback loop” that results in the downward spiral. We are to assume that the growth in income inequality will grow until we are at the Marxian state of “the reserve army of the unemployed,” or at least a reserve army of people that are unable to find work that will allow them to support themselves.</p>
<p>Like so many others who have claimed capitalism is destroying the middle class, Stiglitz turns to the policies created during the Great Depression and after World War II for salvation, seeing the time from the 1930s to the late 1950s as a supposed golden era of prosperity. He writes:</p>
<blockquote><p>After the New Deal of the 1930s, American inequality went into decline. By the 1950s inequality had receded to such an extent that another Nobel laureate in economics, Simon Kuznets, formulated what came to be called Kuznets's law. In the early stages of development, as some parts of a country seize new opportunities, inequalities grow, he postulated; in the later stages, they shrink. The theory long fit the data—but then, around the early 1980s, the trend abruptly reversed.</p></blockquote>
<p>To reverse this trend of rising inequality – and rising poverty – Stiglitz calls for a return to the Depression-era policies of high marginal taxes and using the regulatory structure to recreate the financial and business cartels built by New Deal regulations that dominated American production, finance, and transportation at that time. Indeed, apart from the anti-discrimination laws that now are part of the modern legal landscape, Stiglitz believes that the only hope for our future is to return to the past:</p>
<blockquote><p>…we need more progressive taxation and high-quality federally funded public education, including affordable access to universities for all, no ruinous loans required. We need modern competition laws to deal with the problems posed by 21st-century market power and stronger enforcement of the laws we do have. We need labor laws that protect workers and their rights to unionize. We need corporate governance laws that curb exorbitant salaries bestowed on chief executives, and we need stronger financial regulations that will prevent banks from engaging in the exploitative practices that have become their hallmark. We need better enforcement of antidiscrimination laws: it is unconscionable that women and minorities get paid a mere fraction of what their white male counterparts receive. We also need more sensible inheritance laws that will reduce the intergenerational transmission of advantage and disadvantage.</p></blockquote>
<h4><strong>Challenging Stiglitz’s Logic</strong></h4>
<p>Stiglitz hardly is the only modern economist that wants the American economy to be restructured to resemble how it looked in 1939. Paul Krugman many times called for a “New New Deal” and actually claims that the <a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=2ahUKEwiD3cPP4KHeAhVhx1QKHSTVBYoQwqsBMAF6BAgFEAQ&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DyfGZJDPWCzM&usg=AOvVaw3UgrbIU5v_EphKOgLQd2oF"> U.S. middle class didn’t even exist until President Franklin D. Roosevelt </a> created it with his policies.</p>
<p>In reading the Stiglitz “we need” rant, it is clear that he sees the economy as both mechanistic and deterministic. Capital will have increasing returns because, well, capital has increasing returns, which means that over time, capital will increase the incomes of its owners and everyone else will become poorer. In fact, as one goes through the entire article, one can conclude that he believes, like Marx, that a market system is internally unstable and that it always will implode because a few people will see their incomes increase, but only at the expense of the masses, who will see their incomes decrease.</p>
<p>Indeed, if one follows Stiglitz to his logical conclusions, one would have to assume that the U.S. economy is a trap of exploitation and misery for American workers, as they toil longer hours and watch their standard of living slip away. He writes:</p>
<blockquote><p>At the time of the Civil War, the market value of the slaves in the South was approximately half of the region's total wealth, including the value of the land and the physical capital—the factories and equipment. The wealth of at least this part of this nation was not based on industry, innovation and commerce but rather on exploitation. Today we have replaced this open exploitation with more insidious forms, which have intensified since the Reagan-Thatcher revolution of the 1980s. This exploitation…is largely to blame for the escalating inequality in the U.S.</p></blockquote>
<p>Like Krugman, Stiglitz uses an array of statistics and graphs to “prove” that before Ronald Reagan and Margaret Thatcher took power, the American and British economies were ensconced in “equality” <em>and</em> prosperity. For some unknown reason, however, free-market ideas suddenly emerged seemingly from nowhere to influence politicians to create a new economic system that undid the carefully-crafted structured post-New Deal economy which had created the American middle class and turned them into poverty-stricken serfs.</p>
<p>There is a problem with the Stiglitz analysis: It is wrong both theoretically <em>and</em> empirically. First, the 1970s were a decade both of inflation and economic decline in both the USA and Great Britain. In the USA, the economy wavered between inflationary booms (with inflation reaching well over 10 percent) and devastating busts, including the 1974-75 recession, and in Great Britain, the situation was even worse, as <a href="https://www.youtube.com/watch?v=bw53Fbgq4GQ"> demonstrated in a 1977 “60 Minutes” broadcast</a>, “Will There Always Be An England?”</p>
<p>The sad thing is that Stiglitz is trying to claim that Americans were better off economically in 1980 than they are now, which only can mean he believes Americans had a better standard of living 40 years ago than today. Yet, as pointed out by Philip Brewer, it is easy to confuse something like income equality to higher living standards. The so-called Golden Age of the 1950s was a time when a <a href="https://www.wisebread.com/our-high-high-standard-of-living-1"> third of Americans lived in poverty. Writes Brewer </a> :</p>
<blockquote><p>In the 1950s and 1960s, a working man could support a family at a middle-class standard of living with just one income. It might surprise you to learn that one person working full-time, even at minimum wage, can still support a family of four at that standard of living. Nowadays we call that "living in poverty."</p></blockquote>
<p>Theoretically, Stiglitz holds that capital and resource owners over time receive increasing returns to capital which has the effect of raising the owners’ income over time, but only at the expense of everyone else. Thus, in his view, capital is the culprit, and as an economy accumulates increasing amounts of capital, income inequality — and poverty — logically follow. The only way to reverse this trend, he believes, is for the state to confiscate huge amounts of income from capital and resource owners and transfer it to lower-income people through welfare payments or availability of government services.</p>
<p>If Stiglitz is correct, it would be the first time in recorded history that capital accumulation gained through a profit-and-loss system would be responsible for decreasing the overall standard of living in an economy. Furthermore, Stiglitz seems to be oblivious to the economic role of capital: increase the supply of goods and services in an economy. By looking <em>only</em> at the income which capital owners gain and by failing to understand the real economic significance of capital accumulation, Stiglitz is left with applying a crabbed Marxist analysis in which the “rich” gain increasing shares of income, thus leaving everyone else with smaller income shares – with the result being an overall “glut” of goods that cannot be sold, leading to increasing numbers of layoffs, unemployment, and ultimate economic collapse. That economists from Jean Baptiste Say to Ludwig von Mises — and, may I add, the historical record — have debunked his arguments fails to keep Stiglitz from repeating them.</p>
<p>By publishing his article in <em>Scientific American</em> and couching his analysis in the language of science, Stiglitz wants us to believe that his viewpoints are systematic and have the aura of inevitability, as though he were describing the results of the Law of Gravity. In reality, Stiglitz simply repeats the fallacies of Thomas Malthus, Karl Marx, and John Maynard Keynes and presents a stiff, mechanistic, and utterly false view of how an economy works.</p>
<p>Throughout history, we have seen how socialism takes an economy backward, whether it is practices in the former U.S.S.R., Mao’s China, Cuba, and now Venezuela. He was unable to comprehend how Venezuela’s “socialist miracle” would fall apart, and now he intellectually is unable and unwilling to engage the truth as to why the deterioration of a socialist economy results in wealth for a few and real poverty for the masses. In other words, he cannot comprehend why the socialist economy is rigged.</p>
William L. Anderson<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/stig2.PNG?itok=GfnmQDOh" width="240" alt="stig2.PNG" />44694November 14, 2018 - 6:00 AMFront page feedWhy Ludwig von Mises Advocated for Liberal Nationalism Following WWIhttps://mises.org/node/44684
<p>In his criticism of imperialist policies in the service of socialism, labor-unionism, and the socialist war economy Ludwig von Mises could not restate many conventional arguments. He faced an unprecedented task in confronting the claim that imperialism can enhance the welfare of a nation. His pioneering analysis brilliantly confirmed Carl Menger’s insight that methodological individualism is able to analyze even large collective phenomena.</p>
<p>The main thesis in the first chapter of <a href="https://mises.org/library/nation-state-and-economy"><em>Nation, State, and Economy</em></a> is that governments are incapable of improving the condition of the nations they rule. The reason is that the origin, emergence, growth, flowering, and decline of nations are subject to natural laws. The operation of these laws can be modified by government power but not abrogated, and any alteration will play out to the detriment of the nation. Mises proved his case by first analyzing nations in a free society and then turning to examine the impact of government power on their evolution. His practical conclusions called for the denationalization of the nation, or more precisely, for keeping government intervention as far as possible out of the life of language communities.</p>
<p>Following Scherer, Grimm, and Otto Bauer, Mises defined nations as language communities. He stressed that as far as democratic regimes are concerned, this definition is more than a mere convention. In democracies, communication—and thus language—is the primary political means. Language communities are therefore of critical political importance.<a class="see-footnote" id="footnoteref1_cs6r4si" title="See Mises, Nation, Staat und Wirtschaft, pp. 9f. He stated that a nation’s specific language generated specific “political constructions” and in particular specific foundational ideas determining the operation of their governments (Staatsgedanken); see ibid., pp. 12, 38, 41, 87." href="#footnote1_cs6r4si">1</a><a class="see-footnote" id="footnoteref2_w71wo5o" title="Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f." href="#footnote2_w71wo5o">2</a> What were the natural laws determining the rise and fall of language communities? Mises considered various objective factors determining their evolution.<a class="see-footnote" id="footnoteref3_94uqz2r" title="For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff." href="#footnote3_94uqz2r">3</a> But his decisive considerations start from the fact that the membership in a language community is not something unalterable. Each human person can decide to leave his former nation and join another. In a free society, Mises stressed, nations would be purely voluntary associations:</p>
<blockquote><p>No people and no part of a people shall be held against its will in a political association that it does not want. The totality of freedom-minded persons who are intent on forming a state appears as the political nation; <em>patrie, Vaterland</em> becomes the designation of the country they inhabit; patriot becomes a synonym of <em>free-minded</em>.<a class="see-footnote" id="footnoteref4_9kngzhl" title="Mises, Nation, Staat und Wirtschaft, p. 27; Nation, State, and Economy, p. 34." href="#footnote4_9kngzhl">4</a> </p>
<p>Liberalism knows no conquests, no annexations; just as it is indifferent towards the state itself, so the problem of the size of the state is unimportant to it. It forces no one against his will into the structure of the state. Whoever wants to emigrate is not held back. When a part of the people of the state wants to drop out of the union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so. The nation as an organic entity can be neither increased nor reduced by changes in states; the world as a whole can neither win nor lose from them.<a class="see-footnote" id="footnoteref5_a57dn2w" title="Mises, Nation, Staat und Wirtschaft, pp. 31f.; Nation, State, and Economy, pp. 39f." href="#footnote5_a57dn2w">5</a></p></blockquote>
<p>What, then, determines individual membership in a language community? Neglecting objective factors such as the familial, historical, cultural, and political environments of the individual, Mises focused on the voluntary factor of assimilation. He asserted that, for practical reasons, language minorities tend to assimilate to the language majorities with whom they are affiliated through trade and other forms of social intercourse. Therefore, local minority nations ceteris paribus tend to disappear in the course of time. Mises stressed that this assimilation process was dependent on individual membership in certain social classes because social contacts were class-dependent. Minorities could preserve a separate existence for as long as spatial and social mobility were heavily controlled through custom and laws. Things changed radically when classical liberalism abolished such laws. The result was a dramatic migration—both physical and social—that disrupted the established balances between nations. Mises gave special attention to the impact of the increased spatial mobility, which by the late nineteenth century had already reached a massive scale. These migrations constantly produced areas of mixed cultures, threatening the established groups with their disappearance through assimilation, thus prompting political rivalry and conflict.<a class="see-footnote" id="footnoteref6_hk54huo" title="See Mises, Nation, Staat und Wirtschaft, p. 48" href="#footnote6_hk54huo">6</a></p>
<p>Mises did not believe these movements could be stopped because they reflected the self-interest of the migrants.<a class="see-footnote" id="footnoteref7_wo4tiob" title="En passant he mentioned his contribution to the economics of migration by highlighting the importance of relative overpopulation, in distinction to already-known absolute overpopulation. See Mises, Nation, Staat und Wirtschaft, pp. 45ff. He had developed the concept of relative over-population in his “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 576." href="#footnote7_wo4tiob">7</a> What could be done, then, to alleviate the national conflicts that were the necessary consequence of those migrations? The only viable solution, Mises argued, was to reduce the role of the state within society, because the political conflicts between nationalities primarily concerned control of the state apparatus:</p>
<blockquote><p>Of course, the struggle of nationalities over the state and government cannot disappear completely from polyglot territories. But it will lose sharpness to the extent that the functions of the state are restricted and the freedom of the individual is extended. Whoever wishes peace among peoples must fight statism.<a class="see-footnote" id="footnoteref8_9ft7q8d" title="Mises, Nation, Staat und Wirtschaft, p. 62; Nation, State, and Economy, p. 77." href="#footnote8_9ft7q8d">8</a></p>
<p>The way to eternal peace does not lead through strengthening state and central power, as socialism strives for. The greater the scope the state claims in the life of the individual and the more important politics becomes for him, the more areas of friction are thereby created in territories with mixed population. Limiting state power to a minimum, as liberalism sought, would considerably soften the antagonisms between different nations that live side by side in the same territory. The only true national autonomy is the freedom of the individual against the state and society. The “statification” of life and of the economy leads with necessity to the struggle of nations.<a class="see-footnote" id="footnoteref9_ffogalk" title="Mises, Nation, Staat und Wirtschaft, pp. 78f.; Nation, State, and Economy, p. 96." href="#footnote9_ffogalk">9</a></p></blockquote>
<p>Mises offered here a radical alternative to the prevalent models for solving national conflicts. Austria had the longest experience with national struggles within a common state, and its intellectual, political, and institutional history was therefore richer than that of any other country in analyzing and solving this problem.<a class="see-footnote" id="footnoteref10_nd7un2n" title="For surveys on Austrian language legislation, see Alfred Fischel, ed., Materialien zur Sprachenfrage (Brünn: Irrgang, 1902); idem, ed., Das österreichische Sprachenrecht, 2nd ed. (Brünn: Irrgang, 1910); Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 421ff." href="#footnote10_nd7un2n">10</a> For example, the constitution of the Austrian great-dukedom of Siebenbürgen, which existed until 1848, provided for separate parliaments and administrations for Saxons (Germans), Hungarians, and Szeklers. Affairs of general interest were dealt with in a common parliament, which debated in Latin. The ugly side of this otherwise charming arrangement was that the Romanians, who were in the numerical majority in Siebenbürgen, had no representation.<a class="see-footnote" id="footnoteref11_wm3h2w3" title="See Eduard Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hannover: Helwing, 1912), p. 30." href="#footnote11_wm3h2w3">11</a> During the revolution of 1848, a promising approach was developed to overcome this and similar problems. On March 4, 1849 the deputies of the constitutive assembly (which had by then moved to the city of Kremsier) voted on the proposed Kremsier Constitution, the point of which was to abolish the old territorial units composing the empire (the “kingdoms and lands”) and to replace them with administrative counties, the boundaries of which would be drawn according to the national affiliation of the inhabitants. The German nationalists reacted on the very same day with a counter-proposal presented by Prince Schwarzenberg. From then on, the principle of equal legal treatment of the different languages was on the defensive and finally defeated.<a class="see-footnote" id="footnoteref12_ab49hm6" title="See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 323; RöskauRydel, “Galizien, Bukowina, Moldau,” p. 97." href="#footnote12_ab49hm6">12</a></p>
<p>The failure of the revolution prevented the practical application of the Kremsier Constitution, but the idea lived on, especially in the various programs of the social-democratic party. At their 1899 convention in Brünn, the social democrats decided to tackle the problem of national conflicts by creating parallel state organizations along national lines. This approach, they believed, would ensure “national autonomy” to each nation and thus prevent struggles between the nations once and for all. To serve as a model for the rest of Austria, they transformed their own party, creating parallel national organizations.<a class="see-footnote" id="footnoteref13_yk95pnb" title="The social-democratic faction in the central parliament thereafter called itself “union of social-democratic deputies.” See Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 351ff." href="#footnote13_yk95pnb">13</a> In the following years, its intellectual leaders, Karl Renner and young Otto Bauer, revived and refined and popularized the idea of replacing the old territorial units with new national counties.<a class="see-footnote" id="footnoteref14_p1l44io" title="See Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: Verlag der Wiener Volksbuchhandlung, 1907); translated as The Question of Nationalities and Social Democracy (Minneapolis: University of Minnesota Press, 2000). Before World War I, Karl Renner published his ideas on the nationality question under the pseudonyms “Synoptikus” and “Rudolf Springer.” See Synoptikus, Staat und Nation (Vienna: Dietl, 1899); Rudolf Springer, Die Krise des Dualismus und das Ende der Déakistischen Episode in der Geschichte der Habsburgschen Monarchie: eine politische Skizze (Vienna: published by the author, 1904); idem, Grundlagen und Entwicklungsziele der Österreichisch-Ungarischen Monarchie (Leipzig: Deuticke, 1906). At the end of World War I, he published under his true name: Das Selbstbestimmungrecht der Nationen: in besonderer Anwendung auf Oesterreich (Leipzig: Deuticke, 1918)." href="#footnote14_p1l44io">14</a> It turned out however, that nationalistic passions were too strong to be tamed even by the spirit of socialist solidarity. After the introduction of universal suffrage in 1907, the party quickly dissolved into national organizations and lost all impact on Austrian politics. With hindsight, and with the help of Mises’s theory, we can identify the root cause of these failures. All of his predecessors had tried to use government to solve the problem of national struggles. None of them recognized (or admitted) that coercive association—the sine qua non of the state—was the very source of national conflicts. A different government scheme cannot possibly be a solution for a conflict caused by the nature of government itself.</p>
<p>But how far could one go in keeping the state out of society? How far should one go? Mises argued that the only limits are of a technical-administrative nature:</p>
<blockquote><p>The size of a state’s territory...does not matter. It is another question whether a state is viable when its population is small. Now, it is to be noted that the costs of many state activities are greater in small states than in large ones. The dwarf states, of which we still have a number in Europe, like Liechtenstein, Andorra, and Monaco, can organize their court systems by levels of jurisdiction, for example, only if they link up with a neighboring state. It is clear that it would be financially quite impossible for such a state to set up as comprehensive a court system as that which a larger state makes available to its citizens, for example, by establishing courts of appeal.<a class="see-footnote" id="footnoteref15_h034lua" title="Mises, Nation, Staat und Wirtschaft, pp. 66f.; Nation, State, and Economy, p. 82." href="#footnote15_h034lua">15</a></p></blockquote>
<p>Hence, Mises advocated a complete liberalization of society. There should be no political limits to this process. And it would in practice be limited only by banal technical considerations. In other words, Mises welcomed the unhampered competition among national territories, which in a free “inter-national” society would be a peaceful competition between language-based cultures, in which each individual, through his assimilation choices, would determine the fate of the various language communities. Mises sensed that the only dignified attitude toward the reality of cultural competition was national self-confidence:</p>
<blockquote><p>A nation that believes in itself and its future, a nation that means to stress the sure feeling that its members are bound to one another not merely by accident of birth but also by the common possession of a culture that is valuable above all to each of them, would necessarily be able to remain unperturbed when it saw individual persons shift to other nations. A people conscious of its own worth would refrain from forcibly detaining those who wanted to move away and from forcibly incorporating into the national community those who were not joining it of their free will. To let the attractive force of its own culture prove itself in free competition with other peoples— that alone is worthy of a proud nation, that alone would be true national and cultural policy. The means of power and of political rule were in no way necessary for that.<a class="see-footnote" id="footnoteref16_dg4eiwd" title="Mises, Nation, Staat und Wirtschaft, p. 61; Nation, State, and Economy, p. 76." href="#footnote16_dg4eiwd">16</a></p></blockquote>
<p>Mises argued not only that political rule is unnecessary to improve the condition of a nation, but also that it is incapable of doing so. In a free society people constantly migrate to those locations offering the most favorable conditions for production. Every individual has an incentive to migrate from a relatively poor area to a relatively rich area. These migrations would continue until wage rates and interest rates are equal in all locations.<a class="see-footnote" id="footnoteref17_p99di89" title="With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff." href="#footnote17_p99di89">17</a> In a liberalized world, therefore, there would be a tendency away from differences in income. There would eventually be no rich or poor countries in the world. There would only be countries that are more densely populated, and other countries that are less so.</p>
<p>Mises pointed out that government intervention does not change anything about people’s motives to migrate from relatively poor areas into relatively rich ones. On the contrary, if government tries to keep its people in the land through a system of protective tariffs, it only exacerbates the problem. Protective tariffs might prevent the emigration of those who would be most affected by foreign competition, but they reduce the per capita income of all the other members of society, further multiplying the incentives for emigration. Again, a dispassionate suitability analysis comes out against government intervention. Mises concluded that the only rational approach in matters of political nationalism was to follow classical-liberal precepts: shrink the state, open borders, and face the cultural competition of international migrations.</p>
<h6><em>Excerpted from <a href="https://mises.org/library/mises-last-knight-liberalism-0">Chapter 8 of Mises: The Last Knight of Liberalism</a></em></h6>
<ul class="footnotes"><li class="footnote" id="footnote1_cs6r4si"><a class="footnote-label" href="#footnoteref1_cs6r4si">1.</a> See Mises, Nation, Staat und Wirtschaft, pp. 9f. He stated that a nation’s specific language generated specific “political constructions” and in particular specific foundational ideas determining the operation of their governments (Staatsgedanken); see ibid., pp. 12, 38, 41, 87.</li>
<li class="footnote" id="footnote2_w71wo5o"><a class="footnote-label" href="#footnoteref2_w71wo5o">2.</a> Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f.</li>
<li class="footnote" id="footnote3_94uqz2r"><a class="footnote-label" href="#footnoteref3_94uqz2r">3.</a> For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff.</li>
<li class="footnote" id="footnote4_9kngzhl"><a class="footnote-label" href="#footnoteref4_9kngzhl">4.</a> Mises, Nation, Staat und Wirtschaft, p. 27; Nation, State, and Economy, p. 34.</li>
<li class="footnote" id="footnote5_a57dn2w"><a class="footnote-label" href="#footnoteref5_a57dn2w">5.</a> Mises, Nation, Staat und Wirtschaft, pp. 31f.; Nation, State, and Economy, pp. 39f.</li>
<li class="footnote" id="footnote6_hk54huo"><a class="footnote-label" href="#footnoteref6_hk54huo">6.</a> See Mises, Nation, Staat und Wirtschaft, p. 48</li>
<li class="footnote" id="footnote7_wo4tiob"><a class="footnote-label" href="#footnoteref7_wo4tiob">7.</a> En passant he mentioned his contribution to the economics of migration by highlighting the importance of relative overpopulation, in distinction to already-known absolute overpopulation. See Mises, Nation, Staat und Wirtschaft, pp. 45ff. He had developed the concept of relative over-population in his “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 576.</li>
<li class="footnote" id="footnote8_9ft7q8d"><a class="footnote-label" href="#footnoteref8_9ft7q8d">8.</a> Mises, Nation, Staat und Wirtschaft, p. 62; Nation, State, and Economy, p. 77.</li>
<li class="footnote" id="footnote9_ffogalk"><a class="footnote-label" href="#footnoteref9_ffogalk">9.</a> Mises, Nation, Staat und Wirtschaft, pp. 78f.; Nation, State, and Economy, p. 96.</li>
<li class="footnote" id="footnote10_nd7un2n"><a class="footnote-label" href="#footnoteref10_nd7un2n">10.</a> For surveys on Austrian language legislation, see Alfred Fischel, ed., Materialien zur Sprachenfrage (Brünn: Irrgang, 1902); idem, ed., Das österreichische Sprachenrecht, 2nd ed. (Brünn: Irrgang, 1910); Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 421ff.</li>
<li class="footnote" id="footnote11_wm3h2w3"><a class="footnote-label" href="#footnoteref11_wm3h2w3">11.</a> See Eduard Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hannover: Helwing, 1912), p. 30.</li>
<li class="footnote" id="footnote12_ab49hm6"><a class="footnote-label" href="#footnoteref12_ab49hm6">12.</a> See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 323; RöskauRydel, “Galizien, Bukowina, Moldau,” p. 97.</li>
<li class="footnote" id="footnote13_yk95pnb"><a class="footnote-label" href="#footnoteref13_yk95pnb">13.</a> The social-democratic faction in the central parliament thereafter called itself “union of social-democratic deputies.” See Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 351ff.</li>
<li class="footnote" id="footnote14_p1l44io"><a class="footnote-label" href="#footnoteref14_p1l44io">14.</a> See Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: Verlag der Wiener Volksbuchhandlung, 1907); translated as The Question of Nationalities and Social Democracy (Minneapolis: University of Minnesota Press, 2000). Before World War I, Karl Renner published his ideas on the nationality question under the pseudonyms “Synoptikus” and “Rudolf Springer.” See Synoptikus, Staat und Nation (Vienna: Dietl, 1899); Rudolf Springer, Die Krise des Dualismus und das Ende der Déakistischen Episode in der Geschichte der Habsburgschen Monarchie: eine politische Skizze (Vienna: published by the author, 1904); idem, Grundlagen und Entwicklungsziele der Österreichisch-Ungarischen Monarchie (Leipzig: Deuticke, 1906). At the end of World War I, he published under his true name: Das Selbstbestimmungrecht der Nationen: in besonderer Anwendung auf Oesterreich (Leipzig: Deuticke, 1918).</li>
<li class="footnote" id="footnote15_h034lua"><a class="footnote-label" href="#footnoteref15_h034lua">15.</a> Mises, Nation, Staat und Wirtschaft, pp. 66f.; Nation, State, and Economy, p. 82.</li>
<li class="footnote" id="footnote16_dg4eiwd"><a class="footnote-label" href="#footnoteref16_dg4eiwd">16.</a> Mises, Nation, Staat und Wirtschaft, p. 61; Nation, State, and Economy, p. 76.</li>
<li class="footnote" id="footnote17_p99di89"><a class="footnote-label" href="#footnoteref17_p99di89">17.</a> With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff.</li>
</ul>Jörg Guido Hülsmann<img typeof="foaf:Image" src="https://mises.org/system/files/styles/slideshow/private/GettyImages-1058001202.jpg?itok=DNFOl0Tk" width="240" alt="GettyImages-1058001202.jpg" />44684November 13, 2018 - 2:00 PMFront page feedThe Case Against Pharma Patent Monopolieshttps://mises.org/node/44630
<p>Entrepreneurs face decisions in the free market for any good or service. Entrepreneurs may enter new markets, leave existing markets, or adjust the quality or price for goods offered in markets. These decisions are based on anticipation of future prices and costs. The entrepreneur assumes the risk of loss for bad decisions and is entitled to the profits realized from good decisions.</p>
<p>Entrepreneurs must compete with other suppliers either on the basis of lower price or improved quality. Copying existing items and offering them at lower prices is a common means of competition. Copying is not stealing as long as the raw materials, labor, and the capital necessary for production belong to the producer.</p>
<p>Monopoly defined as barrier to entry cannot exist in a free market. Monopoly requires an agent to prevent competitors from competing. In the US pharmaceutical market, the government creates monopolies through licenses to sell drugs and patents that make copies of drugs illegal. The monopoly privilege permits the supplier to charge a higher price than would be possible on the free market. The excess profit achievable via monopoly privilege is an unearned rent characteristic of cronyism rather than free market capitalism.</p>
<p>Since monopoly rents are unearned, there must be some justification for monopoly privilege. One justification is the protection against the “theft” of an idea or intellectual property. Stephan Kinsella has made a free market argument <a href="https://mises-media.s3.amazonaws.com/Against%20Intellectual%20Property_2.pdf?file=1&type=document"> against intellectual property</a>. A car can be used to illustrate the argument. A car is property. Property rights are assigned to the car. If a thief stole my car, I would be aware of the theft when the car was no longer available for my use. I cannot use the car because it has been stolen. Ideas do not have this characteristic, so ideas should not be considered as property with property rights attached to them. If someone “copies” a drug molecule, nothing has been stolen. The idea has not been wiped from the inventor’s mind. The copycat does not restrain or impair use of the idea by the inventor in any way. The only loss suffered by the inventor is the ability to realize monopoly rents, but these monopoly rents are unearned and their loss cannot be considered to have been stolen.</p>
<p>Another justification for monopoly privilege is that without the guarantee of monopoly rents, new pharmaceuticals would not be brought to market. This is an assertion without any evidence. It is undoubtedly true that more pharmaceuticals are brought to market with patent monopolies than would be without patent monopolies, but the same can be said for subsidies. The goal of a market is not maximization of transactions, but rather the increase in wealth via mutually beneficial exchanges. If a drug will not be brought to market without the ability to charge monopoly prices, then the market is telling society that consumers have more pressing needs than the new drug.</p>
<p>Another justification is that the costs of satisfying Food and Drug Administration (FDA) requirements to bring new drugs to market are so high that no new drugs would be developed without monopoly rents. This may be true, but this is a reason to abolish the FDA rather than grant monopoly patent privileges. The FDA mission is to ensure the safety and efficacy of drugs. There are examples of drugs approved by the FDA that were not efficacious (<a href="https://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(11)61761-3.pdf">Xigris</a>) or safe (<a href="https://www.npr.org/series/5033105/vioxx-the-downfall-of-a-drug">Vioxx</a>). Since the value of efficacy and safety are subjective, it is not even possible to ensure efficacy and safety under all circumstances.</p>
<p>Every use of a drug by every patient is an experiment with an uncertain outcome. Neither the efficacy nor the safety of the drug is known ahead of time. We can only estimate efficacy and safety based on past experience. Use of a drug may lead to a good result the first time and anaphylactic shock the next time. Use of drug may lead to good results most of the time and a catastrophic side effect on rare occasion. <a href="https://jamanetwork.com/journals/jama/article-abstract/356164"> Aplastic anemia </a> following the use of chloramphenicol, an antibiotic, is a rare side effect occurring 3–6 weeks after dosing and it is usually fatal. Some drugs become less efficacious with repeat use. The efficacy of antibiotics will depend on the sensitivity profile of the offending bacteria which change over time. Adverse side effects of drugs may not become apparent for decades. Daughters of women who received diethylstilbestrol (DES) during pregnancy developed <a href="https://www.cdc.gov/des/hcp/information/daughters/risks_daughters.html"> clear cell cancer </a> of the vagina up to 40 years after birth. No matter what standards are used to define efficacy and safety, there will remain outlier risks to the public.</p>
<p>Safety and efficacy cannot be considered in a vacuum. Safety and efficacy must be compared to available alternatives. Patients are far more willing to take a chance on a new treatment if there are no good alternatives. In a world without the FDA, new drugs would have to be significantly less expensive than available alternatives. Pharmaceutical companies might very well have to give new drugs away for free or even pay patients to take them in order to establish a record of safety and efficacy. Over time, drugs would establish a record of safety and efficacy. Drugs with significant advantages to safety or efficacy would permit price premiums for brand recognition. The market should determine the price premium that consumers pay for improvements in quality.</p>
<p>Some drugs continue to be used despite known risks. Some of these risks are dose dependent and require individual monitoring by drug level testing. Some of these risks are idiosyncratic and require periodic testing for toxicity. There is no objective way to balance the potential benefits and uncertain risks of a drug. Individual patients should assume the risks (and costs) in order to realize potential benefits. The market should determine the tradeoff between efficacy and safety.</p>
Gilbert Berdine<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/harma2.PNG?itok=Ugq6BBfq" width="240" alt="harma2.PNG" />44630November 13, 2018 - 11:00 AMFront page feedDoes a Falling Money Supply Cause Economic Slumps?https://mises.org/node/44686
<p>In his writings, Professor Milton Friedman blamed central bank policies for causing the Great Depression. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent a collapse in the money stock. In response to this failure, Friedman argued the money stock M1, which stood at $28.264 billion in October 1929; fell to $19.039 billion by April 1933 — a decline of almost 33%.<a class="see-footnote" id="footnoteref1_k05snbs" title="Milton Friedman and Rose Friedman, Free To Choose (Macmillan Company of Australia, Melbourne), pp. 70–90." href="#footnote1_k05snbs">1</a> <sup></sup></p>
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<p>Because of the fall in the money stock argued Friedman, economic activity followed suit. By July 1932 year-on-year industrial production fell by over 31%. Also, year-on-year the consumer price index (CPI) had plunged. By October 1932, the CPI fell by 10.7%.</p>
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<p>Contrary to Friedman's conclusions, the fall in the money stock was a result — and not the cause — of the shrinking pool of wealth brought about by the previous loose monetary policies of the central bank.</p>
<h4>The Essence of the Pool of Wealth</h4>
<p>Essentially, the pool of wealth is the quantity of consumer goods available in an economy to support future production. In the simplest of terms — a lone man on an island is able to pick 25 apples an hour. With the aid of a picking tool, he is able to raise his output to 50 apples an hour. Making the tool however, takes time.</p>
<p>During the time he is busy making the tool the man will not be able to pick any apples. In order to have the tool, therefore, the man must first have enough apples to sustain himself while he is busy making it. His pool of wealth is his means of sustenance for this period — the quantity of apples he has saved for this purpose.</p>
<p>The size of this pool determines whether or not a more sophisticated means of production can be introduced. If it requires one year of work for the man to build this tool, but he has only enough apples saved to sustain him for one month, then the tool will not be built — and the man will not be able to increase his productivity.</p>
<p>The island scenario is complicated by the introduction of multiple individuals who trade with each other and use money. The essence, however, remains the same — the size of the pool of wealth sets a brake on the introduction of more productive stages of production.</p>
<p>Trouble erupts whenever the banking system makes it appear that the pool of wealth is larger than it is in reality. When a central bank expands the money stock, this does not enlarge the pool of wealth. It gives rise to the consumption of goods, which is not preceded by production. It leads to less means of sustenance.</p>
<p>As long as the pool of wealth continues to expand, loose monetary policies give the impression that it is actually the key factor for economic growth. That this is not the case becomes apparent as soon as the pool of wealth begins to stagnate or shrink. Once this happens, the economy begins its downward plunge. The most aggressive loosening of money will not reverse the plunge (for money cannot replace apples).</p>
<h4>Introducing Money to our Analysis</h4>
<p>The existence of the central bank and fractional reserve banking permits commercial banks to generate credit, which is not backed up by wealth, i.e., credit out of "thin air." Once the unbacked credit is generated, it sets in motion activities that give rise to the production of goods and services that are not on the highest consumers’ preference list. As long as the pool of wealth is expanding and banks are eager to expand credit, then various activities that in a free unhampered economy would most likely not emerge continue to prosper.</p>
<p>Whenever the extensive creation of credit out of "thin air" lifts the pace of wealth consumption above the pace of wealth production this starts to undermine the pool of wealth. Consequently, the performance of various activities starts to deteriorate and bank’s bad loans start to rise. In response to this, banks curtail their loans and this in turn sets in motion a decline in the money stock.</p>
<p>Does every curtailment of lending result in a decline in the money stock?</p>
<p>Let us assume Tom places $1000 in a saving deposit for three months with Bank X. The bank in turn lends the $1000 to Mark for three months. On the maturity date Mark repays the bank $1000 plus interest. Bank X in turn, after deducting its fees, returns the original money plus interest to Tom. Therefore, what we have here is that Tom lends for three months $1000. He transfers the $1000 through the mediation of Bank X to Mark.</p>
<p>On the maturity date Mark repays the money to Bank X — who in turn transfers the $1000 to Tom. Observe that in this case, existent money moved from Tom to Mark and then back to Tom via the mediation of Bank X — the lending is fully backed here by $ 1000. Obviously, the $1000 here does not disappear once the loan is repaid to the bank and in turn to Tom.</p>
<p>Things are, however, different when Bank X lends money out of thin air. For instance, Tom exercises his demand for money by holding some of his money in his pocket and placing $1000 with Bank X in a demand deposit.</p>
<p>By placing $1000 in a demand deposit, he still maintains total claim on the $1000. However Bank X may decide to take $100 from Tom's deposit, and lend this $100 to Mark. The money stock has now increased by $100. Because of this lending, we now have $1,100, which is only backed by $1000 proper. Observe that in this case the $100 loaned does not have an original lender as it was generated out of “thin air” by the Bank X. On maturity date, once Mark repays the borrowed $100 to Bank X, the money disappears. Obviously if the bank is continuously renewing its lending out of thin air then the stock of money will not fall. The existence of fractional reserve banking (banks creating several claims on a given dollar) is the key instrument as far as money disappearance is concerned. However, it is not the cause of the disappearance of money as such. There must be a reason why banks do not renew lending out of thin air.</p>
<h4>What Causes Banks to Curtail Lending?</h4>
<p>The main reason is the weakening of the process of wealth generation that makes it much harder to find good quality borrowers. This in turn means that monetary deflation emerges because of prior monetary inflation that has diluted the pool of wealth. It follows then that a fall in the money stock is just a symptom as it were. The fall in the money stock is in response to the damage caused to the process of wealth formation by the previous monetary inflation.</p>
<p>Note that between December 1920 and August 1924 the Fed was pursuing a very easy interest rate policy and as a result the yield on the 3-months T-Bill fell from 5.88% in December 1920 to 1.9% by August 1924. The yearly growth rate of M1 money supply shot up from minus 2.2% in January 1927 to almost 8% by October 1929.</p>
<p>Furthermore, it is not the fall in the money stock, and the consequent fall in prices, that burdens borrowers but the fact that there is less real wealth. The fall in the money stock is because of the money out of “thin air,” puts things in proper perspective.</p>
<p>Additionally, because of the fall in the money stock various activities that sprang up on the back of the previously expanding money now find it hard going.</p>
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<p>It is those non-wealth generating activities that end up having the most difficulties in serving their debt since these activities were never generating any real wealth and were really supported or funded, so to speak, by genuine wealth generators.</p>
<p>With the fall in the money out of thin air, their support is cut-off. (Remember an increase in money out of thin air sets the transfer of wealth from wealth producers to the holders of the newly increased money.)</p>
<p>Contrary to popular view then, a fall in the money stock as a result of banks curtailing fractional reserve lending is precisely what is needed to set in motion the build-up of real wealth and revitalize the economy.</p>
<p>Printing money only inflicts more damage and therefore should never be considered as a means to help the economy.</p>
<p>In addition, even if the central bank were to be successful in preventing a fall in the money stock, this would not be able to prevent an economic slump if the pool of wealth is falling. Remember money is just the medium of the exchange.</p>
<p>Contrary to popular thinking, the lifting of the money stock to prevent an economic slump undermines the process of wealth generation and sets the platform for a prolonged economic slump. Being the medium of exchange money can only facilitate the flow of goods and services in an economy. It however cannot cause the expansion in goods and services as such. The key for this expansion is the expansion in the pool of wealth.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_k05snbs"><a class="footnote-label" href="#footnoteref1_k05snbs">1.</a> Milton Friedman and Rose Friedman, <em>Free To Choose</em> (Macmillan Company of Australia, Melbourne), pp. 70–90.</li>
</ul>Frank Shostak<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/dollars2_0.PNG?itok=xqlZ6RsN" width="240" alt="dollars2_0.PNG" />44686November 13, 2018 - 6:00 AMFront page feedOn Veterans’ Day, Remember the Lies That Filled Military Cemeterieshttps://mises.org/node/44691
<p>Politicians will be heartily applauded for saluting American’s soldiers today. But if citizens had better memories, elected officials would instead be fleeing tar and feathers. Politicians have a long record of betraying the veterans they valorize.</p>
<p>Veterans Day 2018 has been dominated by the confab of political leaders in Paris to mark the 100<sup>th</sup> anniversary of the end of World War One. American media coverage fixated on President Trump’s cancellation of one of his two visits to U.S. military cemeteries. In his speech yesterday at a U.S. military cemetery in France, <a href="https://video.foxnews.com/v/5860636309001/?#sp=show-clips"> Trump declared that it is “our duty </a> … to protect the peace they so nobly gave their lives to secure one century ago.” But that peace was sabotaged long before the soldiers’ corpses had turned to dust. Though the American media exalted French President Emmanuel Macron’s denunciation of nationalism at the armistice anniversary, it was conniving by French leader George Clemenceau at the Versailles Peace Treaty that helped assure that U.S. sacrifices in 1917 and 1918 were for naught.</p>
<p>Lying about American wars is a venerable presidential tradition. Four years ago, in a visit to Flanders Field Cemetery in Belgium, <a href="https://obamawhitehouse.archives.gov/the-press-office/2014/03/26/remarks-president-obama-his-majesty-king-philippe-and-prime-minister-di"> President Obama saluted </a> the Americans who died in World War One – “the soldiers who manned the trenches were united by something larger — a willingness to fight, and die, for the freedom that we enjoy as their heirs.” In reality, that war was a disaster for freedom practically everywhere. Thanks to conscription, young American men had the choice of going to prison or being sent to fight a war on false pretenses.</p>
<p>Neither Trump nor Obama can compete for the title of Supreme Fabulist on World War One - an honorific that President Woodrow Wilson locked up a century ago. After he was narrowly re-elected in 1916 based on a campaign slogan, “<a href="http://www.woodrowwilsonhouse.org/1916-election">He kept us out of war</a>," Wilson pulled America into the war because "the world must be made safe for democracy." Wilson acted as if Congress’s declaration of war against Germany also declared war on the Constitution, and he ruthlessly censored and persecuted anyone who did not cheer the war effort. Wilson even urged Congress to authorize <a href="https://www.saturdayeveningpost.com/2017/03/alien-enemies-americas-persecution-german-citizens-world-war/"> detention camps for "alien enemies</a>." More than a hundred thousand American soldiers died in the war effort, and another half million Americans <a href="http://time.com/3731745/spanish-flu-history/"> perished from the Spanish flu </a> epidemic spurred and spread by the war. Rather than a new birth of idealism, World War One unleashed chaos and led directly to the rise of Lenin, Mussolini, and Hitler – and a host of tinhorn dictators elsewhere in Europe.</p>
<p>World War One exemplified the deceptions that propelled U.S. conflicts abroad. Veterans Day should be a time to recognize that the history of America’s wars is also a history of political rascality:</p>
<p>In 1846, President James Polk took Americans to war after falsely proclaiming that the Mexican army had crossed the U.S. border and attacked a U.S. army outpost — <a href="https://history.house.gov/HouseRecord/Detail/15032449728"> “shedding the blood of our citizens on our own soil</a>,” he claimed. But he never produced evidence to support his <em> causa belli</em> for a conflict that placed vastly expanded the nation’s boundaries and paved the way for the Civil War.</p>
<p>In 1898, when President William McKinley took the nation to war against Spain, he pledged not to annex foreign territory. He changed his mind after deciding to <a href="http://historymatters.gmu.edu/d/5575/"> “Christianize” the Filipinos </a> (a Catholic nation). Four thousand U.S. troops and hundreds of thousands of Filipinos perished in the merciless crackdowns required to place those islands under the Stars and Stripes.</p>
<p>In 1940, President Franklin Roosevelt capped off his reelection campaign by promising voters: “ <a href="https://books.google.com/books?id=xTKvo-cXv3EC&pg=PA250&lpg=PA250&dq=franklin+roosevelt+%22Your+president+says+this+country+is+not+going+to+war.%E2%80%9D&source=bl&ots=HPl3C-MJAx&sig=0dF3Hudv8h0a8QrQBBHCmkbrf88&hl=en&sa=X&ved=2ahUKEwimgZ7-lcjeAhWK1VkKHTlfDN8Q6AEwBHoECAQQAQ#v=onepage&q=franklin%20roosevelt%20%22Your%20president%20says%20this%20country%20is%20not%20going%20to%20war.%E2%80%9D&f=false"> Your president says this country is not going to war. </a> ” Though FDR portrayed World War Two as an fight for democracy, he secretly signed off on Stalin’s demand for control of almost all of eastern Europe. The result was decades of oppression for Czechs, Hungarians, Poles, and others.</p>
<p>President Lyndon Johnson vastly expanded the Vietnam War purportedly to prevent the domino-like spread of communism (which the CIA concluded would not happen regardless). A secret 1965 Pentagon memo admitted that 70% of the U.S. aim in Vietnam was simply to “ <a href="https://www.mtholyoke.edu/acad/intrel/pentagon3/pent7.htm"> avoid a humiliating US defeat (to our reputation as a guarantor</a>).” Almost 60,000 American troops died so politicians could ravage the national credibility they pretended to preserve.</p>
<p>After 9/11, the U.S. invaded Afghanistan to vanquish Al Qaeda. After top Al Qaeda leaders escaped, President George W. Bush pledged to <a href="https://georgewbush-whitehouse.archives.gov/infocus/afghanistan/20040708.html"> help create a democracy </a> and modernize that nation. Unfortunately, subsequent Afghan elections have been utterly fraud-ridden while corruption multiplied thanks largely to U.S. aid.</p>
<p>President Bush justified invading Iraq in 2003 because of Saddam Hussein’s Weapons of Mass Destruction. The WMDs were never found, so <a href="http://www.cnn.com/2003/WORLD/europe/11/19/bush.speech/index.html"> Bush claimed the U.S. would bring democracy to Iraqis</a>. But the U.S. government helped rig subsequent elections and supported Iraqi rulers’ brutal repression of their opposition, helping spur pervasive conflicts that continue to ravage that nation.</p>
<p>Politicians disdain the soldiers they claim to adore. U.S. troops are <a href="https://www.nytimes.com/2018/05/03/opinion/american-troops-yemen.html"> currently fighting in 14 foreign nations, </a> from Afghanistan to Iraq and Syria to Chad, Yemen, and other locales. When 4 U.S. troops were killed last Fall in Niger, many <a href="https://www.thedailybeast.com/senators-are-stunned-to-discover-we-have-1000-troops-in-niger"> members of Congress were stunned to learn of the U.S. deployment </a> . Congress was similarly negligent <a href="https://en.wikipedia.org/wiki/Walter_Reed_Army_Medical_Center_neglect_scandal"> regarding rat-infested, unsanitary conditions at Walter Reed Army Medical Center in 2007</a>. Politicians had time for hundreds of speeches touting their devotion to veterans but few congressmen noticed the dilapidated state of the showcase military hospital in their back yard.</p>
<p>General Patton said that an ounce of sweat can save a pint of blood. Similarly, a few hours studying the lessons of history can prevent heaps of grave-digging in the coming years. President Trump has saber-rattled against Iran, North Korea, Syria, and other nations. His bellicose rhetoric should spur Americans to review the follies and frauds of past wars before it is too late to stop the next pointless bloodbath.<strong> </strong></p>
<p>The best way to honor veterans is to cancel politicians’ prerogative to send troops abroad to fight on any and every pretext. And one of the best steps towards that goal is to remember the lies for which soldiers died.</p>
James Bovard<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/graves2.PNG?itok=k5PAYhO3" width="240" alt="graves2.PNG" />44691November 12, 2018 - 2:30 PMFront page feedThe Death of Venezuelan Federalism — and the Rise of Socialismhttps://mises.org/node/44670
<p>Once they manage to get control of a state, socialists quickly set to work increasing state power as much as they can. One of the most useful tools in doing this is centralizing all political power within the state. This makes it easier to put all political power into the hands of the party and to carry out the goals of the socialist state.</p>
<p>One the other hand, <em>laissez-faire</em> liberals have long sought to prevent the accumulation of power in the hands of a few by decentralizing the state and the political system. Frequently, this takes the form of federalism.</p>
<p>Although political power has now been almost totally consolidated in the hands of a small ruling party, Venezuela has historically benefited from various sorts of federalism and decentralization. But the road has often been rocky.</p>
<p>Venezuela had <a href="https://venezuelanalysis.com/analysis/70">twenty-seven</a> <a href="https://www.encyclopedia.com/humanities/encyclopedias-almanacs-transcripts-and-maps/venezuela-constitutions"> constitutions </a> between 1811 and 1999. <a href="https://en.wikipedia.org/wiki/Juan_Germ%C3%A1n_Roscio"> Juan German Roscio </a> and <a href="https://en.wikipedia.org/wiki/Crist%C3%B3bal_Mendoza"> Cristobal Mendoza </a> wrote the 1811 constitution, proclaiming the first Republic to be inspired by the US Constitution and the political liberalism of that historical period. The "United States of Venezuela" was a Federalist government but it did not last more than a few months when <a href="https://en.wikipedia.org/wiki/Francisco_de_Miranda">the revolutionary leader Francisco de Miranda</a> capitulated to the royalists in <a href="https://www.britannica.com/biography/Francisco-de-Miranda"> San Mateo in 1812</a>. Subsequently, liberalism and federalism were highly criticized even by many heroes of the independence. Bolívar in Cartagena said, referring the 1811 constitution, “these gentlemen believe they are in Greece, building air republics that are not consistent with the situation and reality of the Venezuelan people, <em>not prepared for the supreme good of freedom</em>” [emphasis added].</p>
<p>Later, each constitution was made to cover the desires and needs of the “caudillo” that ruled the country. Some experts in constitutionalism say that the most federalist was the 1864 constitution, which mandated a high degree of regionalism and localism. Juan Crisóstomo Falcón, member of the <a href="https://en.wikipedia.org/wiki/Liberal_Party_(Venezuela)"> liberal party</a>, ruled The United States of Venezuela — in 1864 — but by 1881, the dictator Antonio Guzmán Blanco began to significantly centralize power again. After that, federalism was increased and decreased depending on the interests of the government. In 1961, when the 26th constitution was written by the most recognized socialists of Venezuela — Rómulo Betancourt, Rafael Caldera, Jóvito Villalba, and others — the federalism had been practically eradicated, they ensured the political freedom and the democratic system but the economic freedoms were diminished almost to nothing.</p>
<p>Nonetheless, Venezuela seemed in the 1990s headed toward embracing a federal system once again. A decentralization process began: it transferred sovereignty and power to each governor of the state, and for the first time in the Venezuela history, the people directly elected the state governors through free elections. It was a limited attempt to redistribute the total control and power that presidents have traditionally held in Venezuela. But the main reason was to calm the social situation that worsened after the <a href="https://en.wikipedia.org/wiki/Caracazo">“Caracazo,” </a>which was a series of violent protests during the late 1980s.</p>
<p>When people elected Hugo Chavez as president in 1998, the country's third-rate military had promised — among other things — a new and “better” constitution. The new constitution eradicated the possibility of continuing with the decentralization process and, worst of all, increased the size of the state overall, while further concentrating power with the president. Allan Brewer Carías, a member of the assembly that wrote the 27th constitution — the 1999 or "Chavista" constitution — eventually voted against it, <a href="http://allanbrewercarias.net/Content/449725d9-f1cb-474b-8ab2-41efb849fea2/Content/I.1.766.pdf">calling it </a>a "missed opportunity to improve Venezuela," but which resulted in more executive power for the presidency.</p>
<p>This move toward more executive power will not shock Americans, who are familiar with this trend. We've seen much of it in the US during recent presidential administrations — especially with the War on Terror. Although this is a trend, as <a href="https://mises.org/profile/thomas-e-woods-jr">Tom Woods</a> tells us, that goes back more than a century.</p>
<p>Venezuela is but one example, but it helps to illustrate how the undoing of federalism, and the centralization of political power, has often been a prelude to the advent and implementation of a stronger state in the name of carrying out socialist agenda items. The US has certainly moved more slowly than Latin American countries that have gone down similar paths. But Americans should not think themselves immune from what now plagues Venezuela.</p>
Rafael Acevedo, Humberto Andrade<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/chavez1.PNG?itok=1f5bAqp7" width="240" alt="chavez1.PNG" />44670November 12, 2018 - 11:00 AMFront page feedMises Institute at Loyola Universityhttps://mises.org/node/44680
44680November 12, 2018 - 10:45 AMFront page feedThe Morning of November 11, 1918https://mises.org/node/44667
<p>On the morning of November 11, 1918, fighter pilot and leading American ace Eddie Rickenbacker quietly ambled to the hangar of his aerodrome in France. The night before, in anticipation of the Armistice, all Allied flights were grounded. But Rickenbacker was not known as a rule-follower. He told his crew to roll out his SPAD XIII fighter plane "and warm it up to test the engines." He climbed into the cockpit, took off, and headed to the trenches of the Western Front. Low clouds kept him low, around five hundred feet. He could see flashes of rifle and machine gun fire from the German trenches.</p>
<blockquote><p>And then it was 11:00 A.M., the eleventh hour of the eleventh day of the eleventh month. I was the only audience for the greatest show ever presented. On both sides of no-man's-land, the trenches erupted. Brown-uniformed men poured out of the American trenches, gray-green uniforms out of the German. From my observer's seat overhead, I watched them throw their helmets in the air, discard their guns, wave their hands. Then all up and down the front, the two groups of men began edging toward each other across no-man's-land. Seconds before they had been willing to shoot each other; now they came forward. Hesitantly at first, then more quickly, each group approached the other.</p>
<p>Suddenly gray uniforms mixed with brown. I could see them hugging each other, dancing, jumping. Americans were passing out cigarettes and chocolate. I flew up to the French sector. There it was even more incredible. After four years of slaughter and hatred, they were not only hugging each other but kissing each other on both cheeks as well.</p>
<p>Star shells, rockets and flares began to go up, and I turned my ship toward the field. The war was over.</p></blockquote>
<p>In memoirs, diary entries, and letters, we find that for the fighters of the First World War, the Great thing about the War was its end. In victorious countries, schools let out, impromptu parades and rallies erupted. These outbursts recognized victory, to be sure, but they chiefly celebrated the end of the war. My own grandmother recounted to me, more than once and each time luminously, the ecstatic celebration in her little town of Murray, Kentucky, where school was cancelled and virtually everyone in town gathered in the courthouse square to celebrate. In my recollection, she never mentioned the word "victory" once. In Rickenbacker's squadron, everyone from pilot to cook joined in a mad celebration, but not of victory, "many of them shouting 'I survived the war! I survived the war!"</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/ricken1.jpg?itok=KuP3rcDQ" title="ricken1.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78477-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/ricken1.jpg?itok=nxTx03pZ" width="693" height="347" alt="ricken1.jpg" title="" /></a></div>
<p><em>Rickenbacker, third from left, and fellow officers of the 94th Aero Squadron.</em></p>
<p>In the defeated countries, people at home were, if more subdued, at least relieved for the end, but they were also incredulous that they had lost when only days before, the newspapers had proclaimed they were winning. Above all, they were apprehensive about what was to come. Spontaneity among the vanquished was more often a matter of revolution, strikes, and mutinies, often accompanied by gun battles in the streets of Berlin, Budapest, and other cities, as revolutionary groups clashed with each other and with returning soldiers. Of course, some ten or eleven million dead soldiers and sailors would never return to join in the joy or the revolt on either side. Nor would the eight million civilian dead of the war be rejoining their loved ones in any country.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/hil.PNG?itok=hsBbTWkk" title="phil.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78478-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/hil.PNG?itok=SpxR60tg" width="383" height="315" alt="hil.PNG" title="" /></a></div>
<p><em><span style="font-family: "georgia" , "times new roman" , serif;">Armistice celebration in Philadelphia.</span></em></p>
<p>But the shooting war was in some ways hardly over. The Russian Civil War raged. Sixteen countries, including the United States, invaded Russia to try to shape the outcome of the brutal Russian war. The Greek army invaded Turkey. Poland fought a regular war with the Soviets in 1920. Large-scale violence scarred postwar societies in Ireland, on the German-Polish border, in the Middle East. And the British maintained the Hunger Blockade on Germany for many more hungry months.</p>
<p>Nor was the notable wartime inflation at an end. This massive transfer of wealth by belligerent governments through inflation impacted both winners and losers. Immediately after the war, inflation escalated to society-bludgeoning hyperinflation in Germany, Hungary, Poland, Austria, and the Soviet Union, creating heightened poverty and misery.</p>
<p>Yet the elites of the war, especially those on the winning side, were already taking advantage of the war's drastic restructuring of international affairs and domestic politics to plan for "the salvation of the empire," or economic hegemony, or control of vast supplies of raw materials and fuel, or "greater" Serbia (or Greece, or Poland, or Romania), or "a new diplomacy." Intellectuals in the victorious countries likewise saw the war as the "fulfillment" of domestic and social goals, a subject which Murray Rothbard <a href="https://mises.org/library/world-war-i-fulfillment-power-and-intellectuals-2">has analyzed in detail</a>. Above all, the international banking houses (many of them connected intimately with the armaments industry (which had lobbied for, sponsored, and organized the complex loans for "modernization" before 1914, and for war loans thereafter) looked forward to the fees and the financial power which the interwoven loans of billions presented. The famous scheme of reparations from Germany and Austria enshrined in the Paris Peace would emerge from American banking agents on the Finance Committee at the Paris Peace Conference. Before long, New York banks would be loaning billions to Germany so that it could pay billions in reparations to Britain, France, and Belgium, so that they could repay millions in war debt to U.S. banks.</p>
<p>Nor would the statist total war systems that had in some degree marked all the belligerents cease on the eleventh day of the eleventh month. The most extreme of these systems--in the Soviet Union, Italy, and Germany--would produce a new phenomenon, totalitarianism, which would wreak havoc with the lives of millions in their own countries and with those of many others throughout the twentieth century and beyond. And even among the previously liberal regimes, total war social and political organization would extend in many ways into the future.</p>
<p>But little of all this could be foreseen as the German Armistice representative, Matthias Erzberger, made his way to the Forest of Compiègne in November 1918, with a little band of Germans commissioned with ending the fighting. Erzberger was the leader of the Progressive branch of the German Center Party, the political party of German Catholics. Early in the war, Erzberger was as enthusiastic about "fulfillment" of German dreams through war as most German politicians were. But he came to see that the aggressiveness of all sides, including the German reintroduction of unlimited submarine warfare, was producing an unlivable world. He managed to push a Peace Resolution through the German parliament in mid-1917, calling for peace negotiations. But the chancellor (a front man for the military dictatorship of Hindenburg and Ludendorff) had been able to rob the Resolution of any meaning.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/eiz.PNG?itok=oLf_DJh-" title="eiz.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78480-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/eiz.PNG?itok=1X2OoKjK" width="275" height="379" alt="eiz.PNG" title="" /></a></div>
<p><em><span style="font-family: "georgia" , "times new roman" , serif;">Matthias Erzberger in 1919. Bundesarchiv, </span><span style="font-family: "georgia" , "times new roman" , serif;">Bild 146-1989-072-16 / Kerbs, </span><span style="font-family: "georgia" , "times new roman" , serif;">Diethart / CC BY-SA 3.0 DE.</span></em></p>
<p>Yet by August 1918, the German High Command was demanding that civilian politicians save Germany by making peace, by ending the war which the generals and imperial bureaucrats had lost. A liberal prince from Baden assembled a moderately liberal cabinet (including Erzberger) at the beginning of October and sent messages to Woodrow Wilson, proposing cease-fire negotiations on the basis of Wilson's famous Fourteen Points peace proposal from the previous January. Wilson hesitated, since the Allies were now driving the Germans from their positions on the Western Front. But at last the Allies agreed to talk. A highly reluctant Erzberger was appointed head of a negotiating team which he assembled hastily: a brigadier general, an upper diplomat, a naval officer, and two translators.</p>
<p>The small group drove--yes drove--to the trench lines, reaching the French outposts in darkness on the evening of November 7, and by the middle of the night had been conducted through the desert of the Western Front to a train at Tergnier, south of St. Quentin. The train conveyed the Germans over the thirty miles to the middle of the Forest of Compiègne. A French railway car soon arrived, carrying the Allied Commander-in-Chief, French Field Marshall Ferdinand Foch and British First Sea Lord, Admiral Sir Rosslyn Weymyss, and their staffs.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/foch.PNG?itok=pXg-zq6P" title="foch.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78481-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/foch.PNG?itok=S27R5fdp" width="256" height="380" alt="foch.PNG" title="" /></a></div>
<p><em><span style="font-family: "georgia" , "times new roman" , serif;">Foch, with cane, and his Compiegne team.</span></em></p>
<p>In the morning, Erzberger and his small group walked to the French railway car. Foch and Weymyss appeared. Foch asked, "What do you want of me?" And the three-day conversation began. Before Erzberger had left Germany, Chancellor Max of Baden had written to Erzberger, "Obtain what mercy you can, Matthias, but for God's sake make peace." This Erzberger proceeded to do, though Foch refused to budge on any issue. Erzberger wired Berlin that the terms were draconian, essentially disarming the German military and providing for Allied occupation of all German territory west of the Rhine. Berlin replied: accept the terms. Erzberger did so, and the Armistice was arranged for November 11, at 11:00 French time. Diplomats from the Allied countries immediately started making arrangements to gather in Paris in January for the peace conference.</p>
<p>On reflection, as Paul Fussell made clear in his masterpiece, <em>The Great War and Modern Memory</em>, the multi-layered ironies of the conflict created the war's most lasting legacies. And none of the ironies was quite as striking as the fact that those groups of politicians, bureaucrats, generals, and bankers on all sides who created the war and directed it, had had a mortality rate of zero, more or less, at least until the Spanish Flu emerged late in the war to kill with a little less social and demographic selectivity.</p>
<p>It is fitting to end this short contemplation of November 11, 1918, with a song that emerged from the soldiers who fought the war, performed <a href="http://soundcloud.com/ukuleleorchestraofgb/hanging-on-the-old-barbed-wire">in a recent recording by a modern musical organization</a> that thrives on ironies, both present and past, the Ukulele Orchestra of Great Britain. The performance is a spare and thoughtful rendition of a British soldier's ditty from the war, "Hanging on the Old Barbed Wire," a reference to that little-celebrated fate of Great War fighters who made it to the killing zone of the enemy's barbed wire in No Man's Land, only to be killed by the interlocking machine gun fire which everyone knew would be zeroed in on that simple but effective obstacle.</p>
<p class="indent2 text-center">If you want to find the General<br />I know where he is.<br />He's pinning another medal on his chest.<br />I saw him, I saw him,<br />Pinning another medal on his chest</p>
<p class="indent2 text-center"><br />If you want to find the Colonel<br />I know where he is.<br />He's sitting in comfort stuffing his bloody gut.<br />I saw him, I saw him,<br />Sitting in comfort stuffing his bloody gut.</p>
<p class="indent2 text-center"><br />If you want to find the Seargent<br />I know where he is.<br />He's drinking all the company rum.<br />I saw him, I saw him,<br />Drinking all the company rum.</p>
<p class="indent2 text-center"><br />If you want to find the private<br />I know where he is.<br />He's hanging on the old barbed wire.<br />I saw him, I saw him,<br />Hanging on the old barbed wire,<br />Hanging on the old barbed wire.</p>
<p>Like many soldiers' perceptions, this simplistic view did not tell the whole truth (in most armies, lieutenants died at a higher rate than privates since they led the attacks "over the top," for example) and it did not extend to the political and economic structures which created the war to begin with. The German sailors in Kiel, who had by early November already started the German Revolution of 1918 by carrying out a mutiny at the Kiel naval base, understood only peace. And they called for it in the shorthand expression: "We want Erzberger!" (And a footnote. Matthias Erzberger would pay dearly for his courageous call for peace negotiations and his grim duty in carrying out the first step when he was assassinated by an ultra-nationalist terrorist group in 1921.)</p>
<p>Yet there was a kernel of truth in the cynical but simplistic perceptions of many Great War soldiers. The personal bravery and the sacrifices on all sides belonged chiefly to the soldiers. The postwar costs would be paid by societies which had had little to do with bringing about the massacres. The victory was in the hands of gentlemen in ornate rooms in the financial and political capitals of the "great powers," the representatives of the modern state, an entity which collectively perceived the results of the war as its own fulfillment.</p>
T. Hunt Tooley<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/wwi.PNG?itok=Fo8cJB7N" width="240" alt="wwi.PNG" />44667November 12, 2018 - 5:00 AMFront page feedAmerica Goes to Warhttps://mises.org/node/6620
<div class="editorial-preface"><p>[<a href="http://mises.org/document/6046/Great-Wars-and-Great-Leaders-A-Libertarian-Rebuttal"><em>Great Wars and Great Leaders: A Libertarian Rebuttal</em></a> (2010)]</p></div>
<p><br />With the onset of war in Europe, hostilities began in the North Atlantic which eventually provided the context — or rather, pretext — for America's participation. Immediately, questions of the rights of neutrals and belligerents leapt to the fore.</p>
<p>In 1909, an international conference had produced the Declaration of London, a statement of international law as it applied to war at sea. Since it was not ratified by all the signatories, the declaration never came into effect. However, once war started the United States inquired whether the belligerents were willing to abide by its stipulations. The Central Powers agreed, providing the entente did the same. The British agreed, with certain modifications, which effectively negated the declaration.<a class="see-footnote" id="footnoteref1_fow0r93" title="Charles Callan Tansill, America Goes to War (Gloucester, Mass.: Peter Smith, 1963 [1938]),pp. 135–62." href="#footnote1_fow0r93">1</a> British "modifications" included adding a large number of previously "free" items to the "conditional" contraband list and changing the status of key raw materials — most important of all, food — to "absolute" contraband, allegedly because they could be used by the German army.</p>
<p>The traditional understanding of international law on this point was expounded a decade and a half earlier by the British prime minister, Lord Salisbury:</p>
<blockquote><p>Foodstuffs, with a hostile destination, can be considered contraband of war only if they are supplies for the enemy's forces. It is not sufficient that they are capable of being so used; it must be shown that this was in fact their destination at the time of the seizure.<a class="see-footnote" id="footnoteref2_f8a9jd4" title="Ibid., p. 148." href="#footnote2_f8a9jd4">2</a></p></blockquote>
<p>That had also been the historical position of the US government. But in 1914 the British claimed the right to capture food as well as other previously "conditional contraband" destined not only for hostile but even for <em>neutral</em> ports, on the pretense that they would ultimately reach Germany and thus the German army. In reality, the aim was, as Churchill, First Lord of the Admiralty candidly admitted, to "starve the whole population — men, women, and children, old and young, wounded and sound — into submission."<a class="see-footnote" id="footnoteref3_5d1m2bl" title="Cited in H.C. Peterson, Propaganda for War: The Campaign against American Neutrality, 1914–1917 (Norman, Okla.: University of Oklahoma Press, 1939),p. 83. As Lord Devlin put it, the Admiralty's orders "were clear enough. All food consigned to Germany through neutral ports was to be captured, and all food consigned to Rotterdam was to be presumed consigned to Germany.… The British were determined on the starvation policy, whether or not it was lawful." Patrick Devlin, Too Proud to Fight: Woodrow Wilson's Neutrality (New York: Oxford University Press, 1975), pp. 193, 195." href="#footnote3_5d1m2bl">3</a></p>
<p>Britain now assumed "practically complete control over all neutral trade," in "flat violation of international laws."<a class="see-footnote" id="footnoteref4_ij35or3" title="Edwin Borchard and William Pooter Lage, Neutrality for the United States (New Haven, Conn.: Yale University Press, 1937), p. 61." href="#footnote4_ij35or3">4</a> A strong protest was prepared by State Department lawyers but never sent. Instead, Colonel House and Spring-Rice, the British ambassador, conferred and came up with an alternative. Denying that the new note was even a "formal protest," the United States politely requested that London reconsider its policy. The British expressed their appreciation for the American viewpoint, and quietly resolved to continue with their violations.<a class="see-footnote" id="footnoteref5_bweha1h" title="Borchard and Lage, Neutrality, pp. 62–72. The US ambassador in London, Walter Hines Page, was already showing his colors. In October, he sent a telegram to the State Department, denouncing any American protests against British interference with neutral rights. "This is not a war in the sense we have hitherto used the word. It is a world-clash of systems of government, a struggle to the extermination of English civilization or of Prussian military autocracy. Precedents have gone to the scrap heap."" href="#footnote5_bweha1h">5</a></p>
<p>In November 1914, the British Admiralty announced, supposedly in response to the discovery of a German ship unloading mines off the English coast, that henceforth the whole of the North Sea was a "military area," or war zone, which would be mined, and into which neutral ships proceeded "at their own risk." The British action was in blatant contravention of international law — including the Declaration of Paris, of 1856, which Britain had signed — among other reasons, because it conspicuously failed to meet the criteria for a legal blockade.<a class="see-footnote" id="footnoteref6_rz0ywaw" title=" See Ralph Raico, "The Politics of Hunger: A Review," in Review of Austrian Economics, vol. 3 (1989), p. 254, and the sources cited. The article is included in the present volume." href="#footnote6_rz0ywaw">6</a></p>
<p>The British moves meant that American commerce with Germany was effectively ended, as the United States became the arsenal of the entente. Bound now by financial as well as sentimental ties to England, much of American big business worked in one way or another for the Allied cause. The house of J.P. Morgan, which volunteered itself as coordinator of supplies for Britain, consulted regularly with the Wilson administration in its financial operations for the entente. The <em>Wall Street Journal</em> and other organs of the business elite were noisily pro-British at every turn, until we were finally brought into the European fray.<a class="see-footnote" id="footnoteref7_6dpzhgc" title="Tansill, America Goes to War, pp. 132–33: "The Wall Street Journal was never troubled by a policy of 'editorial neutrality,' and as the war progressed it lost no opportunity to condemn the Central Powers in the most unmeasured terms."" href="#footnote7_6dpzhgc">7</a></p>
<p>The United States refused to join the Scandinavian neutrals in objecting to the closing of the North Sea, nor did it send a protest of its own.<a class="see-footnote" id="footnoteref8_0hnhqfc" title="Ibid., pp. 177–78." href="#footnote8_0hnhqfc">8</a> However, when, in February, 1915, Germany declared the waters around the British Isles a war zone, in which enemy merchant ships were liable to be destroyed, Berlin was put on notice: if any American vessels or American lives should be lost through U-boat action, Germany would be held to a "strict accountability."<a class="see-footnote" id="footnoteref9_7y59j0g" title="Robert M. La Follete, the progressive senator from Wisconsin, scathingly exposed Wilson's double standard in a speech on the Senate floor two days after Wilson's call for war. It is reprinted in the vital collection, Murray Polner and Thomas E. Woods, Jr., eds., We Who Dared to Say No to War: American Antiwar Writing from 1812 to Now (New York: Basic Books, 2008), pp. 123–32." href="#footnote9_7y59j0g">9</a></p>
<p>In March, a British steamship, <em>Falaba,</em> carrying munitions and passengers, was torpedoed, resulting in the death of one American, among others. The ensuing note to Berlin entrenched Wilson's preposterous doctrine — that the United States had the right and duty to protect Americans sailing on ships flying a <em>belligerent</em> flag. Later, John Bassett Moore, for over 30 years professor of international law at Columbia, long-time member of the Hague Tribunal, and, after the war, a judge at the International Court of Justice, stated of this and of an equally absurd Wilsonian principle:</p>
<blockquote><p>what most decisively contributed to the involvement of the United States in the war was the assertion of a right to protect belligerent ships on which Americans saw fit to travel and the treatment of armed belligerent merchantmen as peaceful vessels. Both assumptions were contrary to reason and to settled law, and no other professed neutral advanced them.<a class="see-footnote" id="footnoteref10_jzn3nnq" title="H.C. Peterson, Propaganda for War: The Campaign against American Neutrality, 1914–1917 (Norman, Okla.: University of Oklahoma Press, 1939),p. 112. Cf. Borchard and Lage, Neutrality, p. 136 (emphasis in original): "there was no precedent or legal warrant for a neutral to protect a belligerent ship from attack by its enemy because it happened to have on board American citizens. The exclusive jurisdiction of the country of the vessel's flag, to which all on board are subject, is an unchallengeable rule of law."" href="#footnote10_jzn3nnq">10</a></p></blockquote>
<p>Wilson had placed America on a direct collision course with Germany.</p>
<p>On May 7, 1915, came the most famous incident in the North Atlantic war. The British liner <em>Lusitania</em> was sunk, with the loss of 1,195 lives, including 124 Americans, by far the largest number of American victims of German submarines before our entry into the war.<a class="see-footnote" id="footnoteref11_anc6rsu" title="On the possible involvement of Winston Churchill, First Lord of the Admiralty, in the genesis of this disaster, see "Rethinking Churchill," in the present volume." href="#footnote11_anc6rsu">11</a> There was outrage in the eastern seaboard press and throughout the American social elite and political class. Wilson was livid. A note was fired off to Berlin, reiterating the principle of "strict accountability," and concluding, ominously, that Germany</p>
<blockquote><p>will not expect the Government of the United States to omit any word or any act necessary to the performance of its sacred duty of maintaining the rights of the United States and its citizens and of safeguarding their free exercise and enjoyment.<a class="see-footnote" id="footnoteref12_1zyz8b8" title="Thomas G. Paterson, ed., Major Problems in American Foreign Policy. Documents and Essays, vol. 2, Since 1914, 2nd ed. (Lexington, Mass.: D. C. Heath, 1978), pp. 30–32." href="#footnote12_1zyz8b8">12</a></p></blockquote>
<p>At this time, the British released the Bryce Report on Belgian atrocities. A work of raw entente propaganda, though profiting from the name of the distinguished English writer, the report underscored the true nature of the unspeakable Hun.<a class="see-footnote" id="footnoteref13_nh0k65j" title="On the fraudulence of the Bryce Report, see Read, Atrocity Propaganda, pp. 201–08; Peterson, Propaganda for War, pp. 51–70; and Knightley, The First Casualty, pp. 83–84, 107." href="#footnote13_nh0k65j">13</a> Anglophiles everywhere were enraged. The Republican Party establishment raised the ante on Wilson, demanding firmer action. The great majority of Americans, who devoutly wished to avoid war, had no spokesmen within the leadership of either of the major parties. America was beginning to reap the benefits of our divinely appointed "bipartisan foreign policy."</p>
<p>In their reply to the State Department note, the Germans observed that submarine warfare was a reprisal for the illegal hunger blockade; that the <em>Lusitania</em> was carrying munitions of war; that it was registered as an auxiliary cruiser of the British Navy; that British merchant ships had been directed to ram or fire upon surfacing U-boats; and that the <em>Lusitania</em> had been armed.<a class="see-footnote" id="footnoteref14_f4pps4i" title="Tansill, America Goes to War, p. 323. The German captain of the U-boat that sank the Lusitania afterwards pointed out that British captains of merchant ships had already been decorated or given bounties for ramming or attempting to ram surfaced submarines; see also Peterson, Propaganda for War, p. 114." href="#footnote14_f4pps4i">14</a></p>
<p>Wilson's secretary of state, William Jennings Bryan, tried to reason with the president: "Germany has a right to prevent contraband going to the Allies, and a ship carrying contraband should not rely upon passengers to protect her from attack — it would be like putting women and children in front of an army." He reminded Wilson that a proposed American compromise, whereby Britain would allow food into Germany and the Germans would abandon submarine attacks on merchant ships, had been welcomed by Germany but rejected by England. Finally, Bryan blurted out: "Why be shocked by the drowning of a few people, if there is to be no objection to starving a nation?"<a class="see-footnote" id="footnoteref15_7gz7u33" title="William Jennings Bryan and Mary Baird Bryan, The Memoirs of William Jennings Bryan (Philadelphia: John C. Winston, 1925), pp. 397–99; Tansill, America Goes to War, pp. 258–59." href="#footnote15_7gz7u33">15</a> In June, convinced that the administration was headed for war, Bryan resigned.<a class="see-footnote" id="footnoteref16_ckn30br" title=" To my mind, Bryan's antiwar position and principled resignation more than make up for his views on evolution, despite H. L. Mencken's attempted demolition of Bryan in a well-known essay." href="#footnote16_ckn30br">16</a></p>
<p>The British blockade was taking a heavy toll, and in February 1916, Germany announced that enemy merchant ships, except passenger liners, would be treated as auxiliary cruisers, liable to be attacked without warning. The State Department countered with a declaration that, in the absence of "conclusive evidence of aggressive purpose" in each individual case, armed belligerent merchant ships enjoyed all the immunities of peaceful vessels.<a class="see-footnote" id="footnoteref17_7doklow" title="Edwin Borchard and William Pooter Lage, Neutrality for the United States (New Haven, Conn.: Yale University Press, 1937),pp. 122–24. John Bassett Moore was scathing in his denunciation of Wilson's new doctrine, that an armed merchant ship enjoyed all the rights of an unarmed one. Citing precedents going back to Supreme Court Justice John Marshall, Moore stated that: "By the position actually taken, the United States was committed, while professing to be a neutral, to maintain a belligerent position." Alex Mathews Arnett,Claude Kitchin and the Wilson War Policies (New York: Russell and Russell, 1971 [1937]), pp. 157–58. " href="#footnote17_7doklow">17</a> Wilson rejected congressional calls at least to issue a warning to Americans traveling on armed merchant ships that they did so at their own risk. During the Mexican civil war, he had cautioned Americans against traveling in Mexico.<a class="see-footnote" id="footnoteref18_hj6mdk3" title="In fact, during the Mexican conflict, Wilson had prohibited outright the shipment of arms to Mexico. As late as August, 1913, he declared: "I shall follow the best practice of nations in this matter of neutrality by forbidding the exportation of arms or munitions of war of any kind from the United States to any part of the Republic of Mexico." Tansill, America Goes to War, p. 64." href="#footnote18_hj6mdk3">18</a> But now Wilson stubbornly refused.</p>
<p>Attention shifted to the sea war once more when a French passenger ship, the <em>Sussex,</em> bearing no flag or markings, was sunk by a U-boat, and several Americans injured. A harsh American protest elicited the so-called <em>Sussex</em> pledge from a German government anxious to avoid a break: Germany would cease attacking without warning enemy merchant ships found in the war zone. This was made explicitly conditioned, however, on the presumption that "the Government of the United States will now demand and insist that the British Government shall forthwith observe the rules of international law." In turn, Washington curtly informed the Germans that their own responsibility was "absolute," in no way contingent on the conduct of any other power.<a class="see-footnote" id="footnoteref19_weasl1p" title="Ibid., pp. 511–15." href="#footnote19_weasl1p">19</a> As Borchard and Lage commented:</p>
<blockquote><p>This persistent refusal of President Wilson to see that there was a relation between the British irregularities and the German submarine warfare is probably the crux of the American involvement. The position taken is obviously unsustainable, for it is a neutral's duty to hold the scales even and to favor neither side.<a class="see-footnote" id="footnoteref20_7rh03w2" title="Borchard and Lage, Neutrality, p. 168." href="#footnote20_7rh03w2">20</a></p></blockquote>
<p>But in reality, the American leaders were anything but neutral.</p>
<p>Anglophile does not begin to describe our ambassador to London, Walter Hines Page, who, in his abject eagerness to please his hosts, displayed all the qualities of a good English spaniel. Afterwards, Edward Grey wrote of Page, "From the first he considered that the United States could be brought into the war early on the side of the Allies if the issue were rightly presented to it and a great appeal made by the President."</p>
<p>"Page's advice and suggestion were of the greatest value in warning us when to be careful or encouraging us when we could safely be firm." Grey recalled in particular one incident, when Washington contested the right of the Royal Navy to stop American shipments to neutral ports. Page came to him with the message. "'I am instructed,' he said, 'to read this despatch to you.' He read and I listened. He then added: 'I have now read the despatch, but I do not agree with it; let us consider how it should be answered.'" Grey, of course, regarded Page's conduct as "the highest type of patriotism."<a class="see-footnote" id="footnoteref21_3xjz2z0" title="Edward Grey, (Viscount Grey of Fallodon), Twenty-Five Years. 1892–1916 (New York: Frederick A. Stokes, 1925), pp. 101–02, 108–11." href="#footnote21_3xjz2z0">21</a></p>
<p>Page's attitude was not out of place among his superiors in Washington. In his memoirs, Bryan's successor as Secretary of State, Robert Lansing, described how, after the <em>Lusitania</em> episode, Britain "continued her policy of tightening the blockade and closing every possible channel by which articles could find their way to Germany," committing ever more flagrant violations of our neutral rights. In response to State Department notes questioning these policies, the British never gave the slightest satisfaction. They knew they didn't have to. For, as Lansing confessed:</p>
<blockquote><p>in dealing with the British Government there was always in my mind the conviction that we would ultimately become an ally of Great Britain and that it would not do, therefore, to let our controversies reach a point where diplomatic correspondence gave place to action.</p></blockquote>
<p>Once joining the British, "we would presumably wish to adopt some of the policies and practices, which the British adopted," for then we, too, would be aiming to "destroy the morale of the German people by an economic isolation, which would cause them to lack the very necessaries of life." With astounding candor, Lansing disclosed that the years-long exchange of notes with Britain had been a sham:</p>
<blockquote><p>everything was submerged in verbiage. It was done with deliberate purpose. It insured the continuance of the controversies and left the questions unsettled, which was necessary in order to leave this country free to act and even act illegally when it entered the war.<a class="see-footnote" id="footnoteref22_cdwknqx" title="Robert Lansing, War Memoirs (Indianapolis: Bobbs–Merrill, 1935), pp. 127–28." href="#footnote22_cdwknqx">22</a></p></blockquote>
<p>Colonel House, too, was distinctly unneutral. Breaking with all previous American practice, as well as with international law, House maintained that it was the <em>character</em> of the foreign government that must decide which belligerent a "neutral" United States should favor. When in September 1914, the Austrian ambassador complained to House about the British attempt to starve the peoples of Central Europe — "Germany faces famine if the war continues" — House smugly reported the interview to Wilson: "He forgot to add that England is not exercising her power in an objectionable way, for it is controlled by a democracy."<a class="see-footnote" id="footnoteref23_q2pc6qu" title="Charles Seymour, ed., The Intimate Papers of Colonel House (Boston: Houghton Mifflin, 1926), vol. 1, p. 323." href="#footnote23_q2pc6qu">23</a></p>
<p>In their president, Page, Lansing, and House found a man whose heart beat as theirs. Wilson confided to his private secretary his deep belief: "England is fighting our fight and you may well understand that I shall not, in the present state of the world's affairs, place obstacles in her way.… I will not take any action to embarrass England when she is fighting for her life and the life of the world."<a class="see-footnote" id="footnoteref24_ggbdzic" title="Joseph P. Tumulty, Woodrow Wilson as I Know Him (New York: Doubleday, Page, 1921), p. 231. Proofs such as these that our leaders had shamelessly lied in their protestations of neutrality were published in the 1920s and '30s. This explains the passion of the anti-war movement before the Second World War much better than the imaginary "Nazi sympathies" or "anti-Semitism" nowadays invoked by ignorant interventionist writers. As Susan A. Brewer writes in Why America Fights: Patriotism and War Propaganda from the Philippines to Iraq (New York: Oxford University Press 2009), p. 280, "The Committee on Public Information presented the war as a noble crusade fought for democracy against demonized Germans. Such a portrayal was overturned by unfulfilled war aims overseas, the abuse of civil liberties at home, and revelations of false atrocity propaganda. In the years that followed Americans expressed distrust of government propaganda and military intervention in what they considered to be other people's wars." This helps account for the appearance from time to time of debunking works of popular revisionism by authors infuriated by the facts they discovered, such as C. Hartley Grattan, Why We Fought (Indianapolis: Bobbs–Merrill, 1969 [1929]); Walter Millis, Road to War: America 1914–1917 (Boston: Houghton Mifflin, 1935); and later Charles L. Mee, Jr., The End of Order: Versailles 1919 (New York: E. P. Dutton, 1980); and Walter Karp's invaluable, The Politics of War: The Story of Two Wars which Altered Forever the Political Life of the American Republic (1890–1920) (New York: Harper and Row, 1979). " href="#footnote24_ggbdzic">24</a></p>
<p>Meanwhile, Colonel House had discovered a means to put the impending American entry into war to good use — by furthering the cause of democracy and "turning the world into the right paths." The author of <em>Philip Dru: Administrator</em> revealed his vision to the president who "knew that God had chosen him to do great things."<a class="see-footnote" id="footnoteref25_q65jrd9" title="Walter A. McDougall, Promised Land, Crusader State: The American Encounter with the World since 1776 (Boston/New York: Houghton Mifflin, 1997),p. 127." href="#footnote25_q65jrd9">25</a> The ordeal by fire would be a hard one, but "no matter what sacrifices we make, the end will justify them." After this final battle against the forces of reaction, the United States would join with other democracies to uphold the peace of the world and freedom on both land and sea, forever. To Wilson, House spoke words of seduction: "This is the part I think you are destined to play in this world tragedy, and it is the noblest part that has ever come to a son of man. This country will follow you along such a path, no matter what the cost may be."<a class="see-footnote" id="footnoteref26_j39l7tw" title="Seymour, The Intimate Papers of Colonel House, vol. 1, p. 470; vol. 2, p. 92." href="#footnote26_j39l7tw">26</a></p>
<p>As the British leaders had planned and hoped, the Germans were starving. On January 31, 1917, Germany announced that the next day it would begin unrestricted submarine warfare. Wilson was stunned, but it is difficult to see why. This is what the Germans had been implicitly threatening for years, if nothing was done to end the illegal British blockade.</p>
<p>The United States severed diplomatic relations with Berlin. The president decided that American merchant ships were to be armed and defended by American sailors, thus placing munitions and other contraband sailing to Britain under the protection of the US Navy. When 11 senators, headed by Robert La Follette, filibustered the authorization bill, a livid Wilson denounced them: "A little group of willful men, representing no opinion but their own, have rendered the great Government of the United States helpless and contemptible." Wilson hesitated to act, however, well aware that the defiant senators represented far more than just themselves.</p>
<p>There were troubling reports — from the standpoint of the war party in Washington — like that from William Durant, head of General Motors. Durant telephoned Colonel House, entreating him to stop the rush to war; he had just returned from the West and met only one man between New York and California who wanted war.<a class="see-footnote" id="footnoteref27_jaj1314" title="Seymour, The Intimate Papers of Colonel House, vol. 2, p. 448." href="#footnote27_jaj1314">27</a> But opinion began to shift and gave Wilson the opening he needed. A telegram, sent by Alfred Zimmermann of the German Foreign Office to the Mexican government, had been intercepted by British intelligence and forwarded to Washington. Zimmermann proposed a military alliance with Mexico <em>in case</em> war broke out between the United States and Germany. Mexico was promised the American Southwest, including Texas. The telegram was released to the press.</p>
<p>For the first time backed by popular feeling, Wilson authorized the arming of American merchant ships. In mid-March, a number of freighters entering the declared submarine zone were sunk, and the president called Congress into special session for April 2.</p>
<p>Given his war speech, Woodrow Wilson may be seen as the anti-Washington. George Washington, in his Farewell Address, advised that "the great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little <em>political</em> connection as possible" (emphasis in original). Wilson was also the anti-John Quincy Adams. Adams, author of the Monroe Doctrine, declared that the United States of America "does not go abroad in search of monsters to destroy." Discarding this whole tradition, Wilson put forward the vision of an America that was entangled in countless political connections with foreign powers and on perpetual patrol for monsters to destroy. Our purpose in going to war was</p>
<blockquote><p>to fight thus for the ultimate peace of the world and for the liberation of its peoples, the German people included: for the rights of nations great and small and the privilege of men everywhere to choose their way of life and of obedience. The world must be made safe for democracy … [we fight] for a universal dominion of right by such a concert of free peoples as shall bring peace and safety to all nations and make the world at last free.<a class="see-footnote" id="footnoteref28_yho6np9" title="The Papers of Woodrow Wilson, January 24-April 6, 1917, Arthur S. Link, ed. (Princeton, N.J.: Princeton University Press, 1983), vol. 41, pp. 525–27." href="#footnote28_yho6np9">28</a></p></blockquote>
<p>Wilson was answered in the Senate by Robert La Follette, and in the House by the Democratic leader Claude Kitchin, to no avail.<a class="see-footnote" id="footnoteref29_czatt64" title="See Robert M. La Follette, "Speech on the Declaration of War against Germany," in Arthur A. Ekirch, Jr., ed., Voices in Dissent: An Anthology of Individualist Thought in the United States (New York: Citadel Press, 1964), pp. 211–22; and Arnett, Claude Kitchin, pp. 227–35." href="#footnote29_czatt64">29</a> In Congress, near-hysteria reigned, as both chambers approved the declaration of war by wide margins. The political class and its associates in the press, the universities, and the pulpits ardently seconded the plunge into world war and the abandonment of the America that was. As for the population at large, it acquiesced, as one historian has remarked, out of general boredom with peace, the habit of obedience to its rulers, and a highly unrealistic notion of the consequences of America's taking up arms.<a class="see-footnote" id="footnoteref30_c93l11x" title="Otis L. Graham, Jr., The Great Campaigns: Reform and War in America, 1900–1928 (Malabar, Fla.: Robert E. Krieger, 1987), p. 89." href="#footnote30_c93l11x">30</a></p>
<p>Three times in his war message, Wilson referred to the need to fight without passion or vindictiveness — rather a professor's idea of what waging war entailed. The reality for America would be quite different.</p>
<div class="article-author"><p>This article is excerpted from the chapter "World War I: The Turning Point" in <a href="http://mises.org/document/6046/Great-Wars-and-Great-Leaders-A-Libertarian-Rebuttal"><em>Great Wars and Great Leaders: A Libertarian Rebuttal</em></a> (2010). The chapter is a much expanded version of an essay that originally appeared in <em><a href="http://mises.org/document/6746/The-Costs-of-War-Americas-Pyrrhic-Victories">The Costs of War: America's Pyrrhic Victories</a></em> (2001).</p></div>
<ul class="footnotes"><li class="footnote" id="footnote1_fow0r93"><a class="footnote-label" href="#footnoteref1_fow0r93">1.</a> Charles Callan Tansill, <em>America Goes to War</em> (Gloucester, Mass.: Peter Smith, 1963 [1938]),pp. 135–62.</li>
<li class="footnote" id="footnote2_f8a9jd4"><a class="footnote-label" href="#footnoteref2_f8a9jd4">2.</a> Ibid., p. 148.</li>
<li class="footnote" id="footnote3_5d1m2bl"><a class="footnote-label" href="#footnoteref3_5d1m2bl">3.</a> Cited in H.C. Peterson, <em>Propaganda for War: The Campaign against American Neutrality, 1914–1917</em> (Norman, Okla.: University of Oklahoma Press, 1939),p. 83. As Lord Devlin put it, the Admiralty's orders "were clear enough. All food consigned to Germany through neutral ports was to be captured, and all food consigned to Rotterdam was to be presumed consigned to Germany.… The British were determined on the starvation policy, whether or not it was lawful." Patrick Devlin, <em>Too Proud to Fight: Woodrow Wilson's Neutrality</em> (New York: Oxford University Press, 1975), pp. 193, 195.</li>
<li class="footnote" id="footnote4_ij35or3"><a class="footnote-label" href="#footnoteref4_ij35or3">4.</a> Edwin Borchard and William Pooter Lage, <em>Neutrality for the United States</em> (New Haven, Conn.: Yale University Press, 1937), p. 61.</li>
<li class="footnote" id="footnote5_bweha1h"><a class="footnote-label" href="#footnoteref5_bweha1h">5.</a> Borchard and Lage, <em>Neutrality</em>, pp. 62–72. The US ambassador in London, Walter Hines Page, was already showing his colors. In October, he sent a telegram to the State Department, denouncing any American protests against British interference with neutral rights. "This is not a war in the sense we have hitherto used the word. It is a world-clash of systems of government, a struggle to the extermination of English civilization or of Prussian military autocracy. Precedents have gone to the scrap heap."</li>
<li class="footnote" id="footnote6_rz0ywaw"><a class="footnote-label" href="#footnoteref6_rz0ywaw">6.</a> See Ralph Raico, "The Politics of Hunger: A Review," in <em>Review of Austrian Economics</em>, vol. 3 (1989), p. 254, and the sources cited. The article is included in the present volume.</li>
<li class="footnote" id="footnote7_6dpzhgc"><a class="footnote-label" href="#footnoteref7_6dpzhgc">7.</a> Tansill, <em>America Goes to War</em>, pp. 132–33: "The Wall Street Journal was never troubled by a policy of 'editorial neutrality,' and as the war progressed it lost no opportunity to condemn the Central Powers in the most unmeasured terms."</li>
<li class="footnote" id="footnote8_0hnhqfc"><a class="footnote-label" href="#footnoteref8_0hnhqfc">8.</a> Ibid., pp. 177–78.</li>
<li class="footnote" id="footnote9_7y59j0g"><a class="footnote-label" href="#footnoteref9_7y59j0g">9.</a> Robert M. La Follete, the progressive senator from Wisconsin, scathingly exposed Wilson's double standard in a speech on the Senate floor two days after Wilson's call for war. It is reprinted in the vital collection, Murray Polner and Thomas E. Woods, Jr., eds., <em>We Who Dared to Say No to War: American Antiwar Writing from 1812 to Now</em> (New York: Basic Books, 2008), pp. 123–32.</li>
<li class="footnote" id="footnote10_jzn3nnq"><a class="footnote-label" href="#footnoteref10_jzn3nnq">10.</a> H.C. Peterson, <em>Propaganda for War: The Campaign against American Neutrality, 1914–1917</em> (Norman, Okla.: University of Oklahoma Press, 1939),p. 112. Cf. Borchard and Lage, <em>Neutrality</em>, p. 136 (emphasis in original): "there was no precedent or legal warrant for a neutral to protect a <em>belligerent</em> ship from attack by its enemy because it happened to have on board American citizens. The exclusive jurisdiction of the country of the vessel's flag, to which all on board are subject, is an unchallengeable rule of law."</li>
<li class="footnote" id="footnote11_anc6rsu"><a class="footnote-label" href="#footnoteref11_anc6rsu">11.</a> On the possible involvement of Winston Churchill, First Lord of the Admiralty, in the genesis of this disaster, see "Rethinking Churchill," in the present volume.</li>
<li class="footnote" id="footnote12_1zyz8b8"><a class="footnote-label" href="#footnoteref12_1zyz8b8">12.</a> Thomas G. Paterson, ed., <em>Major Problems in American Foreign Policy. Documents and Essays</em>, vol. 2, <em>Since 1914</em>, 2nd ed. (Lexington, Mass.: D. C. Heath, 1978), pp. 30–32.</li>
<li class="footnote" id="footnote13_nh0k65j"><a class="footnote-label" href="#footnoteref13_nh0k65j">13.</a> On the fraudulence of the Bryce Report, see Read, <em>Atrocity Propaganda</em>, pp. 201–08; Peterson, <em>Propaganda for War</em>, pp. 51–70; and Knightley, <em>The First Casualty</em>, pp. 83–84, 107.</li>
<li class="footnote" id="footnote14_f4pps4i"><a class="footnote-label" href="#footnoteref14_f4pps4i">14.</a> Tansill, <em>America Goes to War</em>, p. 323. The German captain of the U-boat that sank the <em>Lusitania</em> afterwards pointed out that British captains of merchant ships had already been decorated or given bounties for ramming or attempting to ram surfaced submarines; see also Peterson, <em>Propaganda for War</em>, p. 114.</li>
<li class="footnote" id="footnote15_7gz7u33"><a class="footnote-label" href="#footnoteref15_7gz7u33">15.</a> William Jennings Bryan and Mary Baird Bryan, <em>The Memoirs of William Jennings Bryan</em> (Philadelphia: John C. Winston, 1925), pp. 397–99; Tansill, <em>America Goes to War</em>, pp. 258–59.</li>
<li class="footnote" id="footnote16_ckn30br"><a class="footnote-label" href="#footnoteref16_ckn30br">16.</a> To my mind, Bryan's antiwar position and principled resignation more than make up for his views on evolution, despite H. L. Mencken's attempted demolition of Bryan in a well-known essay.</li>
<li class="footnote" id="footnote17_7doklow"><a class="footnote-label" href="#footnoteref17_7doklow">17.</a> Edwin Borchard and William Pooter Lage, <em>Neutrality for the United States</em> (New Haven, Conn.: Yale University Press, 1937),pp. 122–24. John Bassett Moore was scathing in his denunciation of Wilson's new doctrine, that an armed merchant ship enjoyed all the rights of an unarmed one. Citing precedents going back to Supreme Court Justice John Marshall, Moore stated that: "By the position actually taken, the United States was committed, while professing to be a neutral, to maintain a belligerent position." Alex Mathews Arnett,<em>Claude Kitchin and the Wilson War Policies</em> (New York: Russell and Russell, 1971 [1937]), pp. 157–58. </li>
<li class="footnote" id="footnote18_hj6mdk3"><a class="footnote-label" href="#footnoteref18_hj6mdk3">18.</a> In fact, during the Mexican conflict, Wilson had prohibited outright the shipment of arms to Mexico. As late as August, 1913, he declared: "I shall follow the best practice of nations in this matter of neutrality by forbidding the exportation of arms or munitions of war of any kind from the United States to any part of the Republic of Mexico." Tansill, <em>America Goes to War</em>, p. 64.</li>
<li class="footnote" id="footnote19_weasl1p"><a class="footnote-label" href="#footnoteref19_weasl1p">19.</a> Ibid., pp. 511–15.</li>
<li class="footnote" id="footnote20_7rh03w2"><a class="footnote-label" href="#footnoteref20_7rh03w2">20.</a> Borchard and Lage, <em>Neutrality</em>, p. 168.</li>
<li class="footnote" id="footnote21_3xjz2z0"><a class="footnote-label" href="#footnoteref21_3xjz2z0">21.</a> Edward Grey, (Viscount Grey of Fallodon), <em>Twenty-Five Years. 1892–1916</em> (New York: Frederick A. Stokes, 1925), pp. 101–02, 108–11.</li>
<li class="footnote" id="footnote22_cdwknqx"><a class="footnote-label" href="#footnoteref22_cdwknqx">22.</a> Robert Lansing, <em>War Memoirs</em> (Indianapolis: Bobbs–Merrill, 1935), pp. 127–28.</li>
<li class="footnote" id="footnote23_q2pc6qu"><a class="footnote-label" href="#footnoteref23_q2pc6qu">23.</a> Charles Seymour, ed., <em>The Intimate Papers of Colonel House</em> (Boston: Houghton Mifflin, 1926), vol. 1, p. 323.</li>
<li class="footnote" id="footnote24_ggbdzic"><a class="footnote-label" href="#footnoteref24_ggbdzic">24.</a> Joseph P. Tumulty, <em>Woodrow Wilson as I Know Him</em> (New York: Doubleday, Page, 1921), p. 231. Proofs such as these that our leaders had shamelessly lied in their protestations of neutrality were published in the 1920s and '30s. This explains the passion of the anti-war movement before the Second World War much better than the imaginary "Nazi sympathies" or "anti-Semitism" nowadays invoked by ignorant interventionist writers. As Susan A. Brewer writes in <em>Why America Fights: Patriotism and War Propaganda from the Philippines to Iraq</em> (New York: Oxford University Press 2009), p. 280, "The Committee on Public Information presented the war as a noble crusade fought for democracy against demonized Germans. Such a portrayal was overturned by unfulfilled war aims overseas, the abuse of civil liberties at home, and revelations of false atrocity propaganda. In the years that followed Americans expressed distrust of government propaganda and military intervention in what they considered to be other people's wars." This helps account for the appearance from time to time of debunking works of popular revisionism by authors infuriated by the facts they discovered, such as C. Hartley Grattan, <em>Why We Fought</em> (Indianapolis: Bobbs–Merrill, 1969 [1929]); Walter Millis, <em>Road to War: America 1914–1917</em> (Boston: Houghton Mifflin, 1935); and later Charles L. Mee, Jr., <em>The End of Order: Versailles 1919 </em> (New York: E. P. Dutton, 1980); and Walter Karp's invaluable, <em>The Politics of War: The Story of Two Wars which Altered Forever the Political Life of the American Republic (1890–1920)</em> (New York: Harper and Row, 1979). </li>
<li class="footnote" id="footnote25_q65jrd9"><a class="footnote-label" href="#footnoteref25_q65jrd9">25.</a> Walter A. McDougall, <em>Promised Land, Crusader State: The American Encounter with the World since 1776</em> (Boston/New York: Houghton Mifflin, 1997),p. 127.</li>
<li class="footnote" id="footnote26_j39l7tw"><a class="footnote-label" href="#footnoteref26_j39l7tw">26.</a> Seymour, <em>The Intimate Papers of Colonel House</em>, vol. 1, p. 470; vol. 2, p. 92.</li>
<li class="footnote" id="footnote27_jaj1314"><a class="footnote-label" href="#footnoteref27_jaj1314">27.</a> Seymour, <em>The Intimate Papers of Colonel House</em>, vol. 2, p. 448.</li>
<li class="footnote" id="footnote28_yho6np9"><a class="footnote-label" href="#footnoteref28_yho6np9">28.</a> <em>The Papers of Woodrow Wilson</em>, January 24-April 6, 1917, Arthur S. Link, ed. (Princeton, N.J.: Princeton University Press, 1983), vol. 41, pp. 525–27.</li>
<li class="footnote" id="footnote29_czatt64"><a class="footnote-label" href="#footnoteref29_czatt64">29.</a> See Robert M. La Follette, "Speech on the Declaration of War against Germany," in Arthur A. Ekirch, Jr., ed., <em>Voices in Dissent: An Anthology of Individualist Thought in the United States</em> (New York: Citadel Press, 1964), pp. 211–22; and Arnett, Claude Kitchin, pp. 227–35.</li>
<li class="footnote" id="footnote30_c93l11x"><a class="footnote-label" href="#footnoteref30_c93l11x">30.</a> Otis L. Graham, Jr., <em>The Great Campaigns: Reform and War in America, 1900–1928</em> (Malabar, Fla.: Robert E. Krieger, 1987), p. 89.</li>
</ul>Ralph Raico<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/soldiers2.PNG?itok=Syl3ZFZV" width="240" alt="soldiers2.PNG" />6620November 10, 2018 - 2:00 PMFront page feedThe Tragedy of America's Entry into World War Ihttps://mises.org/node/44668
<p>This week some 80 world dignitaries including Presidents Putin, Trump, and Chancellor Merkel <a href="https://www.rferl.org/a/world-leaders-mark-end-wwi-trump-putin-russia-france-macron/29581439.html" target="_blank"> are gathering in France </a> to mark the culmination of year-long <a href="https://www.worldwar1centennial.org/" target="_blank"> remembrances of the centenary </a> of the end of “the Great War” on November 11, 1918 – later labeled and known to every American high school history student as <em> <a href="https://en.wikipedia.org/wiki/World_War_I" target="_blank"> World War I.</a></em> While at least 17 million people, including more than 116,000 Americans, died in this war — and millions more were wounded, gassed, or maimed — it’s a conflict widely misunderstood today. Indeed, because of World War II’s size and scope, cultural influence, and greater media coverage and capture, the First World War is often called “the forgotten war.”</p>
<p>Yet it was a cataclysmic event in its own right that both foreshadowed more intense and violent warfare in the 20<sup>th</sup> century, and fueled the growth of gargantuan central government in the United States. Most crucially, however, it was a war that should never have been fought — its causal origins and assignment of guilt for same are still a hot topic of debate a century later, a fact that alone attests to its superfluity — and one that, in any case, the United States should never have entered. These are disturbing theses about the war that will not be remembered by any of the global elites in Paris this weekend, but given the lessons for today, Americans should learn about them so as to demand of their Beltway solons wiser policy choices in the future. What follows is a short summary of America’s involvement in the war and lessons for today.</p>
<h4><strong>Origins of the Conflict in 1914</strong></h4>
<p>When the United States declared war on Germany following strong majority votes in both houses of Congress and the impassioned speech of President Woodrow Wilson to a joint session on April 2, 1917, he asserted that America must fight in the European war “to make the world safe for democracy.” This was a mere five months after Wilson had won re-election in 1916 via a slogan of “He kept us out of war.” 100 years later, though, there’s still no clearly-enunciated explanation of what it means to create safety for democracy. Later history would prove, however, that this goal — whatever it meant — was most certainly not achieved by the victorious Entente or their associated power and late entrant, the United States.</p>
<p>Nonetheless, when Count von Metternich convened the Congress of Vienna in November 1814 to settle long-simmering disputes in Europe following the Napoleonic wars, little could he have guessed that precisely a century later his august project would crash forever upon the shoals of boiling Balkan nationalism. Metternich’s Concert of Europe had, in fact, been durable and substantial: after 1815 there had been only minor-but-contained skirmishes across Europe in the 19th century: the formation of the Second French Republic after the liberal revolution of 1848, the Franco-German War of 1871 that flipped Alsace-Lorraine, and the consolidation of German and Italian nation-states. The British, meanwhile, were extending their empire into the far reaches of Asia and Africa. But after victory over Napoleon at Waterloo in 1815, there would be no sizable war in the heart of Europe for another century.</p>
<p>Across the continent as a whole, then, the 19th century was one of general peace and <a href="https://inequality.stanford.edu/sites/default/files/media/_media/pdf/Reference%20Media/Easterlin_2000_History%20of%20Inequality.pdf" target="_blank"> ever-increasing material wealth </a> for the masses, thanks to increasing economic integration and its attendant gains from trade. The rule of law, protection of property rights, a sound monetary framework, and the unleashing of entrepreneurial energies, thanks to <a href="https://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html" target="_blank"> patient capital, </a> had spread across the continent and built a civilized order. It was, said the Austrian economist Ludwig von Mises later, the <a href="https://mises.org/library/liberalism-classical-tradition" target="_blank"> Age of Liberalism </a> , and marked by the broad cessation of warfare and its attendant impoverishing taxation and destruction.</p>
<p>The First World War that ended this widespread peace and prosperity was, therefore, an appalling tragedy. In the end, some 65 million troops <a href="https://www.facinghistory.org/weimar-republic-fragility-democracy/politics/casualties-world-war-i-country-politics-world-war-i" target="_blank"> were mobilized </a> (including 4.7 million Americans), there were more than 20 million casualties including civilians, and the Austro-Hungarian, German, Ottoman, and Russian empires were destroyed. Meanwhile the victorious British and French empires peaked and were effectively bankrupted. The British <a href="https://www.bbc.com/news/business-30306579" target="_blank"> needed a century </a> to pay off its war loans. Many national boundaries were redrawn, and activist high-tax/interventionist governments replaced <em>laissez-faire</em> regimes everywhere.</p>
<h4><strong>American Entry into the War in 1917</strong></h4>
<p>However, initially with the advent of hostilities in 1914, President Wilson attempted to steer a neutral course. There was no discernible reason for America ever to become involved in a European land war, and the United States traded with — and had immigrants from — all countries in the conflict. Following a <a href="https://millercenter.org/the-presidency/presidential-speeches/july-4-1821-speech-us-house-representatives-foreign-policy" target="_blank"> longstanding foreign policy </a> that had first been enunciated by Wilson’s foremost predecessor, George Washington, the American position on the Great War remained, as always, “Friend of Liberty everywhere, Guarantor only of our own.” Critics called it “isolationist,” but the American people in near-unanimity sought to steer clear of the massive conflict across the Atlantic Ocean.</p>
<p>Tensions rose in May of 1915 with the sinking of the merchant cruiser Lusitania by a German U-boat, killing 128 Americans, among others. While there was an outcry against Germany over such unrestricted submarine warfare, the German government had in fact taken pains to warn American passengers via advertisements in major east coast media, and indeed the <a href="https://www.theguardian.com/world/2014/may/01/lusitania-salvage-warning-munitions-1982" target="_blank"> Lusitania was carrying contraband</a>, and hence was a legitimate target of war. In any case Mr. Wilson was able to get the German government to restrict its operations and let a specified number and type of American ships pass through to England, and in spite of a few other minor incidents, the President cruised to re-election in November 2016 via the campaign war-cry of “He kept us out of war.”</p>
<p>By the end of 1916, however, things looked bleak for the Triple Entente (the alliance between Britain, France, and Russia). Russia was in trouble in the east and riddled with revolutionary fervor. The western front, while stabilized, would be bled by increased and more powerful German thrusts should Russia quit the war, as increasingly looked likely. The French and British, racked by losses in Turkey and higher casualties on their German front than the Germans, were beginning to fear an inability to continue to finance the war effort. The Italians were stalemated. The Allies increasingly saw one big solution to their plight, and it lay across the Atlantic.</p>
<p>Pressures thus were mounting on Mr. Wilson to join the fray. The British, as they were to do again after 1939, mounted a broad effort to entice America into their war via propaganda such as alleged German battlefront atrocities in Belgium. Further, tens of billions of (2018-equivalent) dollars had been loaned to Britain and France by New York banks such as Goldman Sachs and J.P. Morgan (which had major European offices in London and Paris, and thus led American capital raising efforts for these belligerents), in at least five times the amount lent to the Central Powers (Germany and Austria-Hungary): should Germany win the war, these loans to the western powers could not be recouped. American armaments makers and industrial producers such as Bethlehem Steel or DuPont, many of which had suffered during the 1913-14 recession in the United States, loved the advent of war. Exports to Britain and France quadrupled between 1914 and 1917.<a class="see-footnote" id="footnoteref1_fbjt6in" title="On both the war in general and America’s involvement in it, the interested reader would benefit from the exceptional historical research and analysis contained in the publications of Austin College historian Hunt Tooley, including especially the driving force behind American entry into the war via the collection of corrupt institutions and special interests that President Eisenhower was later to label America’s “military-industrial-congressional complex."" href="#footnote1_fbjt6in">1</a></p>
<p>Hence there were fervent supporters of American entry into the war from American industrial and financial quarters, as well as some voices in the political class, including former President Theodore Roosevelt, the “John McCain of his day” regarding his “all war, everywhere” bellicosity.</p>
<p>Early in 1917 the Germans came therefore to believe that these various pressures would draw the Americans into the war against them no matter what actions they took. But they also concluded it would take several months for America to mobilize and join the fight. They sensed a quick end in the east and intended to press the attack in the west such that, along with an intensified naval blockade, they could starve Britain and France into forced capitulation before the United States could make a difference.</p>
<p>On January 19, 1917, the Foreign Secretary of the German Empire, Arthur Zimmermann, sent a coded message to the German Ambassador at Mexico City, announcing a resumption of unrestricted submarine warfare on February 1. While a plea would be made to the United States to remain neutral. It was anticipated this would trigger a declaration of war, in which case Germany sought an alliance with Mexico, to attack the United States and reclaim territories in the American Southwest lost 70 years earlier. This Zimmermann Telegram, as it came to be known, was intercepted by the British and made public in the United States, which along with the resumption of sub warfare led President Wilson to break diplomatic relations with Germany on February 2. Mr. Zimmermann admitted the veracity of the note on March 3, and following a few more ship sinkings involving Americans, led Wilson to ask for war on April 2, with a formal declaration approved on April 6.</p>
<h4><strong>Wartime Conduct of the Wilson Administration and the Advent of Big Government and Central Planning </strong></h4>
<p>Although most Americans were inflamed with a sense of patriotic fervor when reminded of the Lusitania (from 23 months earlier!) and then became enraged at news of the Zimmermann Telegram, U.S. entry into the war was not uncontroversial. Secretary of State William Jennings Bryan had already resigned his cabinet position in the aftermath of the Lusitania sinking, fearing a tilt toward the British via war finance. Bryan had recommended to Wilson right away in 1914 that American loans or exports to belligerents be forbidden as a way to shorten the war. This counsel was ignored. Well-known Leftist and progressive Randolph <a href="https://www.antiwar.com/bourne.php" target="_blank"> Bourne publicly broke with Wilson </a> over the war. He was one of many who did so. And there were also critics from what would today be called small-government libertarian types, most prominently <a href="https://fee.org/articles/h-l-mencken-americas-wittiest-defender-of-liberty/" target="_blank"> H.L. Mencken </a> of the <em>Baltimore Sun.</em></p>
<p>This is of interest today because while the war effort went well enough once American soldiers and Marines were on the ground fighting in France, there were pockets of protesters in the United States. The protestors saw no logic to our fighting wars on behalf of European belligerents, with all of whom we had friendly commercial relations before the war, and none of whom represented any threat to us. It is an historical parallel to current era American wars in the Muslim world, and earlier wars in east Asia.</p>
<p>Domestically, historian Ralph Raico reports that the <a href="https://mises.org/library/world-war-i-failure-state-elites" target="_blank"> war ushered in central planning </a> on a massive scale not seen since the Civil War, whose controls and federal dictates were easily surpassed in 1917. Congress passed the National Defense Act, for example. It gave the president the authority, in a time of war "or when war is imminent," to place orders with private firms which would "take precedence over all other orders and contracts." If the manufacturer refused to fill the order at a "reasonable price as determined by the Secretary of War," the government was "authorized to take immediate possession of any such plant and to manufacture therein such product or material as may be required" for the war effort. The private business owner, meanwhile, would be "deemed guilty of a felony."</p>
<p>Once war was declared, the power of the federal government grew at a dizzying pace in all sorts of directions. The <a href="https://en.wikipedia.org/wiki/Food_and_Fuel_Control_Act" target="_blank"> Lever Act</a>, for example, passed on August 10, 1917, was a law that, among other things, created the United States Food Administration and the Federal Fuel Administration: this put the federal government in charge of the production and distribution of all food and fuel in the United States. President Wilson reached into all corners of American life for the sake of the war effort via price controls and monetary manipulation, as well as such direct actions as banning beer sales (and this right before Prohibition).</p>
<p>Some of the <a href="https://www.amazon.com/World-Remade-America-War/dp/0553393324" target="_blank"> Wilson Administration’s conduct was shameful</a>. For example, in an effort at control of public opinion that would make Josef Goebbels proud, some 850 citizens were prosecuted under the Espionage and Sedition Acts between 1917 and 1919, with many jailed for having the temerity to question the logic behind the war. Most famous of these was the former Socialist candidate for President <a href="https://en.wikipedia.org/wiki/Eugene_V._Debs" target="_blank"> Eugene V. Debs</a>, who was fined and given a 10-year jail sentence – at age 63 – after a June 1918 speech in Canton, Ohio wherein he decried American involvement in a war that was of no consequence to us or our national security; Debs further criticized the use of a conscript/slave labor army to prosecute the war. He was given early release by President Harding at Christmas 1921 and met at the White House the next day. But in a cold, damp, dark federal penitentiary in Atlanta, Debs had contracted tuberculosis, sending him to perhaps an early death in 1926.</p>
<p>Further, Wilson set up a propaganda office immediately after the declaration of war, called the Committee on Public Information. This was a government-staffed propaganda agency charged with message control of the media (viz. putting “spin” on war news) to sustain morale in the U.S., to administer voluntary press censorship, and to develop propaganda abroad. This entity eventually comprised 37 distinct divisions. These included the Division of Pictorial Publicity which employed hundreds of artists to create graphics with patriotic themes, or to incite fear and hatred of Germans.</p>
<p>Mr. Wilson also had one of his cronies, Albert M. Briggs, set up the <a href="https://en.wikipedia.org/wiki/American_Protective_League" target="_blank"> American Protective League </a> (APL), an organization of 250,000 private citizens that worked with federal law enforcement agencies during World War I to identify suspected German sympathizers. Its mission was to "counteract the activities of radicals, anarchists, anti-war activists, and left-wing labor and political organizations." In other words, it was a giant "army" of snitches, sort of a benign Gestapo. One victim was a man named Taubert in New Hampshire who received a sentence of <a href="https://www.amazon.com/Espionage-Sedition-Critical-Moments-American/dp/1138023043" target="_blank"> three years in prison </a> for saying out loud and in public that World War I was a war “for J.P. Morgan, and not for the people.” He meant the was was being fought to recoup Morgan's war loans to the British and French, and pad the bottom line of the capitalist class.</p>
<p>The American entry into the war did have the desired effect for the Allies: Germany ran out of money, out of food, and began to suffer reversals in the west. Even though not one square inch of German soil was ever breached, it was the Germans who blinked, and the war was finished precisely 100 years ago this weekend, on November 11, 1918, at 11 AM Central European Time.</p>
<p>In a final scandal, there were perhaps <a href="http://www.post-gazette.com/news/nation/2013/11/11/The-dying-continued-into-the-11th-hour-of-WWI/stories/201311110116" target="_blank"> 10,000 casualties in the final hours </a> of the war’s <a href="https://www.washingtonpost.com/world/europe/in-the-final-hours-of-world-war-i-a-terrible-toll/2018/11/08/940843b4-e33e-11e8-ba30-a7ded04d8fac_story.html?utm_term=.e4663131dda5" target="_blank"> final day </a>ç some 320 Americans died and 3,240 were wounded on the morning of November 11, including U.S. Marines ordered to charge and cross the Meuse River, and the U.S. Army’s 92nd Infantry Division in an attack in the Argonne. In spite of general knowledge on November 9 that the end would likely be on the 11<sup>th</sup>, and with firm knowledge as of 5 AM on the 11th that the Germans had agreed to halt hostilities six hours later, Americans were ordered to attack, in some places, German machine gun nests. The commander of the American Expeditionary Force, General John Pershing, was <a href="https://www.armytimes.com/veterans/salute-veterans/2017/11/10/nov-11-1918-wasted-lives-on-armistice-day/" target="_blank"> challenged in congressional testimony </a> a year later about the insanity of attack orders on the final morning of the war, whereupon he dissembled in his answers. What was later shown to be true was Pershing’s lying to Congress about knowledge of the precise ending of the war. But Pershing, by then an anointed war hero, was never charged with anything, nor was any other American officer.</p>
<h4><strong>The Aftermath of the War and Lessons for Today </strong></h4>
<p>President Wilson, having obtained his victory, and also his seat at the Versailles Conference, sought to pursue a peace grounded in a <a href="https://en.wikipedia.org/wiki/Fourteen_Points" target="_blank"> 14-point proposal </a> that he hoped would form the basis for permanent international tranquility monitored through the League of Nations. But the American people quickly turned inward, rejected American participation in the League, and pulled out of Europe.</p>
<p>Meanwhile, the <a href="https://en.wikipedia.org/wiki/Treaty_of_Versailles" target="_blank"> terms of the Versailles agreements </a> were unduly harsh toward the loser countries. John Maynard Keynes predicted in his 1919 book, <em> <a href="http://oll.libertyfund.org/titles/keynes-the-economic-consequences-of-the-peace" target="_blank"> The Economic Consequences of the Peace,</a></em> that as a result, the war would resume in 20 years. In this, he was precisely correct, as Versailles set forth reparations amounts that the vanquished could never repay (and hence were eventually repudiated in any case). But they were harsh enough into the 1920s to ensure political instability and the destruction of civil society in Germany — that ushered in Hitler.</p>
<p>The participation in the war caused economic gyrations in the United States, too. First and foremost, 116,000 Americans died, and around <a href="https://encyclopedia.1914-1918-online.net/article/war_losses_usa" target="_blank"> 320,000 were wounded </a> or maimed and more than half the war-dead died due to various sicknesses, including deadly influenza that swept the world in 1918-19. (The Spanish Flu claimed 500,000 lives inside the U.S.). Thanks to the exigencies of wartime finance and production, the U.S. economy experienced a jump in debt, inflation, and monetary gyrations, and then a punishing <a href="https://mises.org/library/forgotten-depression-1920" target="_blank"> post-war recession in 1920-21. </a>Then called a “depression,” it was the worst in American history up until then, and remains one of the top four contractions since the Founding of the Republic). Unemployment quadrupled to 12% in 1921, and industrial production declined by more than 30%, amidst much human suffering.</p>
<p>Wartime regulatory oversight and taxes were challenging for American business, and only when deregulation and the Mellon tax cuts came under President Coolidge did the U.S. economy fully recover a vibrancy stolen in the post-war correction.</p>
<p>When seen especially against the outsized global panorama that was World War II, the First World War has receded in Americans’ collective memory. It is little-studied and even less-discussed. But in the fullness of time, armed with full information of subsequent history, analysts have begun to ask the ultimately uncomfortable questions. Why did America go to war, and what was accomplished? In any analysis of costs and benefits of American intervention in a European war, was it the right decision?</p>
<p>Here, the answer is now clear: morally, strategically, and financially, the American entry was a disaster. The American effort clearly failed vis-à-vis President <a href="https://wwi.lib.byu.edu/index.php/Wilson's_War_Message_to_Congress" target="_blank"> Wilson’s own stated war aim</a>: ensuring the spread of democracy and an end to all wars.</p>
<p>But this answer confers more incisive insights with deeper thinking. Historian <a href="https://www.cato.org/people/jim-powell" target="_blank"> Jim Powell </a> of the <a href="https://www.cato.org/" target="_blank">Cato Institute</a> offers an <a href="https://www.amazon.com/Wilsons-War-Woodrow-Blunder-Hitler/dp/1400082366" target="_blank"> interesting and compelling theory </a> about what an alternative flow of events would have looked like in the absence of American intervention in the war. While we cannot ever prove a counterfactual assertion, it is safe to say that had the United States not intervened, the belligerent nations would have likely fought to some sort of draw. They would have negotiated a truce, accepting a status quo according to the position of opposing armies in 1918. This would have had enormous implications going forward. Specifically:</p>
<p>(a) When the czarist regime of Nicholas II collapsed in mid-March 1917, a <a href="https://en.wikipedia.org/wiki/Russian_Provisional_Government" target="_blank"> Provisional Government </a> headed by former Foreign Minister Alexander Kerensky was formed, with an intended goal of sustaining a parliamentary democracy. But confusion and low morale reigned on Russia’s battlefronts, and the Kerensky government was forced to confront an immediate fiscal crisis. Kerensky hoped to exit the war and build a stable polity, but state bankruptcy loomed.</p>
<p>Western powers were approached for financial support, and President Wilson sent former Secretary of State <a href="https://en.wikipedia.org/wiki/Elihu_Root#World_War" target="_blank"> Elihu Root </a> , then 72 years old, to Petrograd to negotiate. Root offered the Russians <a href="https://www.nytimes.com/1984/11/07/opinion/us-aid-to-the-bolsheviks.html" target="_blank"> $325 million in war loans</a>, equivalent to about <a href="https://www.aier.org/cost-living-calculator" target="_blank"> $6.4 billion </a> today, <em>but only if they stayed in the war. </em>Kerensky balked but soon relented, feeling he had no choice; the Russians took the American money and launched new offensives against the Germans in July and August of 1917. These failed, causing Kerensly to lose credibility and support with the Russian people and army. By October, Lenin was on the doorstep to power, taking it in the November 7 revolution. Soon thereafter Lenin and Trotsky concluded a peace with Germany at <a href="https://en.wikipedia.org/wiki/Treaty_of_Brest-Litovsk" target="_blank"> Brest-Litovsk</a>. It included the surrender of vast territories including the Baltic states to Germany. While this treaty was annulled at Versailles, it did give Lenin legitimacy for ending the war that had eluded Kerensky, as well as breathing room to begin consolidating Bolshevik power via the Russian Civil War (1917-22).</p>
<p>(b) But had the Americans not intervened and aided the Kerensky government, Kerensky may well have seen his country as effectively bankrupted and surrendered in March of 1917. The Germans would have had no need to use Lenin, who returned to Petrograd <a href="https://www.history.com/this-day-in-history/lenin-returns-to-russia-from-exile" target="_blank"> after ten years in exile </a> on April 16 (from Switzerland, through German lines). Nor would they needed to support him in inciting Bolshevik passions to overthrow the Romanov dynasty. Instead, the Germans might have supported Kerensky and stabilized Russia prior to the eventual chaos there that fall.</p>
<p>(c) No Lenin and no Bolshevik Revolution in 1917 may well have meant no consolidation of power by the Reds, and thus no Stalin in 1924. Any successful momentum for Kerensky would have implied peace with the West, and perhaps aid in establishing a quasi-liberal market order. No Stalin would imply a different trajectory for history in Russia in the decades before World War II.</p>
<p>(d) The German army meanwhile would have stabilized its front in the West, and indeed perhaps captured additional French and Belgian territory. The war in the West might well have then ended in a general stalemate, with a slight redrawing of border lines and maintenance of Alsace and Lorraine in the Kaiser’s Reich. But there would have been no Versailles, no destruction of German civil society, no hyperinflation, and hence no mass suffering that could only lead to the rise of extremism that in turn produced Adolf Hitler. And no Hitler makes World War II unlikely, at least on the scale that it occurred.</p>
<p>(e) Indeed, even if the Germans had captured Paris, it is unlikely Germany could have subdued England, given British naval superiority and Germany’s worsening fiscal situation by 1918. At some level peace would have obtained in Europe again just as had happened in the 19<sup>th</sup> century. Liberalizing forces would have tamed the alleged German militarism.</p>
<p>(f) A stable German government and society would have meant a faster economic recovery and likely the forestalling of the Nazi regime 13 years later. It is likely Austria, Hungary, Czechoslovakia, and others would have recovered faster, too.</p>
<p>(g) Of course it cannot be forgotten that had the Americans refrained from entry into World War I, the U.S. economy would not have experienced the inflationary boom and then depression in 1920-21, and nor taken on massive war debt, all of which led to Federal Reserve gyrations and severe economic dislocations during and in the years following the war. American mobilization and production of armaments and munitions altered the build-up of capital and consumer goods commensurate with growing peace-time wealth, too.</p>
<p>The bottom line: American intervention in World War I, in league with the Triple Entente powers, spawned Lenin; Versailles; Stalin; Germany’s collapse and descent into anarchy, hyperinflation and bankruptcy; and then Hitler. All this, of course, was followed by World War II and <a href="https://www.nationalww2museum.org/students-teachers/student-resources/research-starters/research-starters-worldwide-deaths-world-war" target="_blank"> 60 million deaths</a>. Of course the analysis can be extended: no Cold War, thanks to a vastly reduced-in-scope World War II, might well have meant neither Korean nor Vietnamese Wars occurred.</p>
<p>World War I was of zero financial, strategic, or moral interest to the vast majority of Americans. There certainly was never any credible threat of an attack against the United States from the Central Powers. And so getting involved in a clash between European empires (and a Turkish/Muslim imperial power being thrown in on one side) made no sense, again, either morally, strategically, or financially.</p>
<p>The uncomfortable truth about World War I from an American perspective is that it made absolutely no difference, to most all Americans, who won the war, short or long term. Had the flag of the Imperial German Reich eventually flown over Paris in 1920, it would have mattered little to most all of us. But it would have mattered a great deal to certain interests, primarily in Washington or New York, at the time. The bankers, industrialists, and power-seeking politicians all had their reasons to want American entry into the war, but of course, no American citizen will ever support the sending of our forces into battle for the sake of corporate profits. So, a fancier and loftier and more sublime war aim was developed by the great manipulator of public opinion, Woodrow Wilson: “Make the world safe for democracy.”</p>
<h4><strong><em>Will We Finally Learn?</em> </strong></h4>
<p>We have seen this political legerdemain several times in American history, before and since. For example, why did America fight the Spanish in 1898, especially since it is highly dubious that they had anything to do with the sinking of the <a href="https://www.pbs.org/crucible/tl10.html" target="_blank"> U.S.S. Maine</a>? Why did America fight in Vietnam, especially since Communism collapsed 16 years later anyway? Why did America go to war in the <a href="https://www.history.com/topics/middle-east/persian-gulf-war" target="_blank"> Middle East in 1991 </a> on behalf of two Arab dictatorships that were at the time being menaced by a third?</p>
<p>And, similar to the flow of events following World War I, what if America had not fought in 1991? There’d have been no <a href="https://www.historyguy.com/no-fly_zone_war.html" target="_blank"> 1991-2003 No Fly Zone War </a> that <a href="https://www.youtube.com/watch?v=R0WDCYcUJ4o" target="_blank"> killed 500,000 Iraqi women and children</a>, or stationing of troops in Saudi Arabia,<u> </u>that <a href="https://www.theguardian.com/world/2002/nov/24/theobserver" target="_blank"> enraged Osama Bin Laden </a> and al Qaeda. In turn, while not provable, it is at least thus quite possible that American intervention in Iraq in 1991 begat 9/11/2001, which in turn begat wars in the Muslim world in 2001 and 2003 – that continue to rage today.</p>
<p>It is imperative that in a dangerous world the United States possess an impregnable national defense. But based on our considerable history, and the primordial lesson unveiled by World War I’s unintended consequences, will we ever learn to be more circumspect in our deployment of combat power? Will we learn both the wisdom and humility of mission-capable defense that is second to none, but to be careful in attacking others for no good reason?</p>
<p>Let us be starkly clear in our closing thought: America went to war 100 years ago for no good reason, and certainly not for the “general interest” of national security. Instead, President Wilson wanted war for the sake of narrow special interests contained in what President Eisenhower was to later call the “<a href="https://washingtonsblog.com/2015/10/what-eisenhower-really-said-about-the-military-indutrial-complex.html" target="_blank">military-industrial- <wbr> congressional complex</wbr></a>.” This panoply of overlapping Beltway groups or individuals, coupled with the <a href="https://spectator.org/39326_americas-ruling-class-and-perils-revolution/" target="_blank"> “ruling class elite” who toil in Manhattan boardrooms</a>, is still alive and well today. These groups can all do great things on their own, legitimately on behalf of the American people, as the case may be. But never again should an American soldier or Marine be asked to die, face down in the mud, thousands of miles away from the borders he is paid to defend, for anything less than a lethal threat to our national security. Nor should hard-pressed American taxpayers foot the bill for the wars of others. <em>THAT</em> is the primordial lesson of World War I, which reverberates through time and still resonates today.</p>
<p>On the occasion of the centennial of the second most brutal human conflict of all time, we salute all who died on all sides, and as Americans express our respect to the American war-dead. Yet at the same time, knowing the history of this and similar conflicts, one feels nothing but contempt for Woodrow Wilson and his fellow politicians. The foreign policy of a free and great commercial republic should anywhere and everywhere be: champion of liberty for all; vindicator only of our own.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_fbjt6in"><a class="footnote-label" href="#footnoteref1_fbjt6in">1.</a> On both <a href="https://www.amazon.com/Great-War-Western-Front-Home/dp/1137471263/tag?=misesinsti-20" target="_blank"> the war in general </a> and America’s involvement in it, the interested reader would benefit from the <a href="https://mises.org/wire/these-deeply-momentous-things-united-states-intervention-world-war-i" target="_blank"> exceptional historical research </a> and analysis contained in the <a href="https://mises.org/system/tdf/19_1_4.pdf?file=1&type=document&fbclid=IwAR1qgxxEvLCB1wOjiIqq_Jk53Bx78P4q3fqkYfnDlZkjyZ5H83m-x6Qr4ww" target="_blank"> publications </a> of Austin College historian Hunt Tooley, including especially the driving force behind American entry into the war via the collection of corrupt institutions and special interests that President <a href="https://washingtonsblog.com/2015/10/what-eisenhower-really-said-about-the-military-indutrial-complex.html" target="_blank"> Eisenhower was later to label </a> America’s “military-industrial-congressional complex."</li>
</ul>John L. Chapman<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/greatwar1.PNG?itok=1PZFks8F" width="240" alt="greatwar1.PNG" />44668November 10, 2018 - 11:00 AMFront page feedThe Next Financial Crisishttps://mises.org/node/44624
<p>We have been reading numerous comments recently about a forthcoming recession and the next crisis, particularly on <a href="https://mises.org/wire/ten-years-after-lehman-solution-was-more-lehmans">the tenth anniversary of the collapse of Lehman Brothers.</a></p>
<p>The question is not whether there will be a crisis, but when. In the past fifty years, we have seen more than eight global crises and many more local ones, so the likelihood of another one is quite high. Not just because of the years passed since the 2007 crisis, but because the factors that drive a global crisis are all lining up.</p>
<p>What drives a financial crisis? Three factors.</p>
<ul><li><strong>Demand-side policies that lead investors and citizens to believe that there is no risk.</strong> Complacency and excess risk-taking cannot happen without the existence of a widespread belief that there is some safety net, a government or central bank cushion that will support risky assets. Terms like “search for yield” and “financial repression” come precisely from artificial demand signals created from monetary and political forces.</li><li><strong>Excessive risk-taking in assets that are perceived as risk-free or bullet-proof. </strong>It is impossible to build a bubble on an asset where investors and companies see an extraordinary risk. It must happen under the belief that there is no risk attached to rising valuations because “this time is different”, “fundamentals have changed” or “there is a new paradigm”, sentences we have all hears more times than we should in the past years.</li><li><strong>The realization that this time is <em>not</em> different. </strong>Bubbles do not burst because of one catalyst, as we are told to believe. The 2007-2008 did not start because of Lehman, it was just a symptom of a much wider problem that had started to burst in small doses months before. Excess leverage to a growth cycle that fails to materialize as the consensus expected.</li></ul><p>What are the main factors that could trigger the next financial crisis?</p>
<ul><li><strong>Sovereign Debt.</strong> The riskiest asset today is sovereign bonds at abnormally low yields, compressed by central bank policies. With $6.5 trillion in negative-yielding bonds, the nominal and real losses in pension funds will likely be added to the losses in other asset classes.</li><li><strong>Incorrect perception of liquidity and VaR (Value at Risk).</strong> Years of high asset correlation and synchronized bubble led by sovereign debt have led investors to believe that there is always a massive amount of liquidity waiting to buy the dips to catch the rally. This is simply a myth. That “massive liquidity” is just leverage and when margin calls and losses start to appear in different areas -emerging markets, European equities, US tech stocks- the liquidity that most investors count on to continue to fuel the rally simply vanishes. Why? Because VaR (value at risk) is also incorrectly calculated. When assets reach an abnormal level of correlation and volatility is dampened due to massive central bank asset purchases, the analysis of risk and probable losses is simply ineffective, because when markets fall they fall in tandem, as we are seeing these days, and the historical analysis of losses is contaminated by the massive impact of monetary policy actions in those years. When the biggest driver of asset price inflation, central banks, starts to unwind or simply becomes part of the expected liquidity -like in Japan-, the placebo effect of monetary policy on risky assets vanishes. And losses pile up.</li></ul><p>The fallacy of synchronized growth triggered the beginning of what could lead to the next recession. A generalized belief that monetary policy had been very effective, growth was robust and generalized, and debt increases where just a collateral damage but not a global concern. And with the fallacy of synchronised growth came the excess complacency and the acceleration of imbalances. The 2007 crisis erupted because in 2005 and 2006 even the most prudent investors gave up and surrendered to the rising-market beta chase. In 2017 it was accelerated by the incorrect belief that emerging markets were fine because their stocks and bonds were soaring despite the Federal reserve normalization.</p>
<p>What will the next crisis look like?</p>
<p>Nothing like the last one, in my opinion. Contagion is much more difficult because there have been some lessons learnt from the Lehman crisis. There are stronger mechanisms to avoid a widespread domino effect in the banking system.</p>
<p>When the biggest bubble is sovereign debt the crisis we face is not one of the massive financial market losses and real economy contagion, but a slow fall in asset prices, as we are seeing, and global stagnation.</p>
<p>The next crisis is not likely to be another Lehman, but another Japan, a widespread zombification of global economies to avoid the pain of a large re-pricing of sovereign bonds, that leads to massive tax hikes to pay the rising interests, economic recession and unemployment.</p>
<p>The risks are obviously difficult to analyse because the world entered into the biggest monetary experiment in history with no understanding of the side effects and real risks attached. Governments and central banks saw rising markets above fundamental levels and record levels of debt as collateral damages, small but acceptable problems in the quest for a synchronised growth that was never going to happen.</p>
<p>The next crisis, like the 2007-08 one, will be blamed on a symptom (Lehman in that case), not the real cause (aggressive monetary policy incentivising risk-taking and penalising prudence). The next crisis, however, will find central banks with almost no real tools to disguise structural problems with liquidity, and no fiscal space in a world where most economies are running fiscal deficits for the tenth consecutive year and global debt is at all-time highs.</p>
<p>When will it happen? We do not know, but if the warning signs of 2018 are not taken seriously, it will likely occur earlier than expected. But the governments and central banks will not blame themselves, they will present themselves -again- as the solution.</p>
<h6><em>Originally published at <a href="https://www.dlacalle.com/en/the-next-financial-crisis/#more-8941">dlacalle.com</a></em></h6>
Daniel Lacalle<img typeof="foaf:Image" src="https://mises.org/system/files/styles/slideshow/private/GettyImages-526724529.jpg?itok=eT3bmXfB" width="240" alt="GettyImages-526724529.jpg" />44624November 10, 2018 - 6:00 AMFront page feedWorld War I as Fulfillment: Power and the Intellectualshttps://mises.org/node/6165
<table width="98%" cellspacing="2" cellpadding="2" bordercolor="#000000" border="1" bgcolor="#c8cde1"><tbody><tr><td width="50%" valign="top" align="left"><ul><li><a href="#1">I. Introduction</a></li><li><a href="#2">II. Pietism and Prohibition</a></li><li><a href="#3">III. Women at War and at the Polls</a></li><li><a href="#4">IV. Saving Our Boys from Alcohol and Vice</a></li><li><a href="#5">V. The <em>New Republic</em> Collectivists</a></li></ul></td><td width="50%" valign="top" align="left"><ul><li><a href="#6">VI. Economics in Service of the State: The Empiricism of Richard T. Ely</a></li><li><a href="#7">VII. Economics in Service of the State: Government and Statistics</a></li><li><a href="#notes">Notes</a></li></ul></td></tr></tbody></table><h4>I. Introduction</h4>
<p>In contrast to older historians who regarded World War I as the destruction of progressive reform, I am convinced that the war came to the United States as the "fulfillment," the culmination, the veritable apotheosis of progressivism in American life.<a href="#note1" name="ref1" id="ref1">[1]</a> I regard progressivism as basically a movement on behalf of Big Government in all walks of the economy and society, in a fusion or coalition between various groups of big businessmen, led by the House of Morgan, and rising groups of technocratic and statist intellectuals. In this fusion, the values and interests of both groups would be pursued through government.</p>
<p>Big business would be able to use the government to cartelize the economy, restrict competition, and regulate production and prices, and also to be able to wield a militaristic and imperialist foreign policy to force open markets abroad and apply the sword of the State to protect foreign investments. Intellectuals would be able to use the government to restrict entry into their professions and to assume jobs in Big Government to apologize for, and to help plan and staff, government operations. Both groups also believed that, in this fusion, the Big State could be used to harmonize and interpret the "national interest" and thereby provide a "middle way" between the extremes of "dog-eat-dog" laissez faire and the bitter conflicts of proletarian Marxism.</p>
<p>Also animating both groups of progressives was a postmillennial pietist Protestantism that had conquered "Yankee" areas of northern Protestantism by the 1830s and had impelled the pietists to use local, state, and finally federal governments to stamp out "sin," to make America and eventually the world holy, and thereby to bring about the Kingdom of God on earth. The victory of the Bryanite forces at the Democratic national convention of 1896 destroyed the Democratic Party as the vehicle of "liturgical" Roman Catholics and German Lutherans devoted to personal liberty and laissez faire and created the roughly homogenized and relatively non-ideological party system we have today. After the turn of the century, this development created an ideological and power vacuum for the expanding number of progressive technocrats and administrators to fill. In that way, the locus of government shifted from the legislature, at least partially subject to democratic check, to the oligarchic and technocratic executive branch.</p>
<p>World War I brought the fulfillment of all these progressive trends. Militarism, conscription, massive intervention at home and abroad, a collectivized war economy, all came about during the war and created a mighty cartelized system that most of its leaders spent the rest of their lives trying to recreate, in peace as well as war. In the World War I chapter of his outstanding work, <a href="https://store.mises.org/Crisis-and-Leviathan-P138C0.aspx"><em>Crisis and Leviathan</em></a>, Professor <a href="http://mises.org/daily/2551">Robert Higgs</a> concentrates on the war economy and illuminates the interconnections with conscription.</p>
<p>In this paper, I would like to concentrate on an area that Professor Higgs relatively neglects: the coming to power during the war of the various groups of progressive intellectuals.<a href="#note2" name="ref2" id="ref2">[2]</a> I use the term "intellectual" in the broad sense penetratingly described by F.A. Hayek: that is, not merely theorists and academicians, but also all manner of opinion-molders in society — writers, journalists, preachers, scientists, activists of all sort — what Hayek calls "secondhand dealers in ideas."<a href="#note3" name="ref3" id="ref3">[3]</a> Most of these intellectuals, of whatever strand or occupation, were either dedicated, messianic postmillennial pietists or else former pietists, born in a deeply pietist home, who, though now secularized, still possessed an intense messianic belief in national and world salvation through Big Government. But, in addition, oddly but characteristically, most combined in their thought and agitation messianic moral or religious fervor with an empirical, allegedly "value-free," and strictly "scientific" devotion to social science. Whether it be the medical profession's combined scientific and moralistic devotion to stamping out sin or a similar position among economists or philosophers, this blend is typical of progressive intellectuals.</p>
<p>In this paper, I will be dealing with various examples of individual or groups of progressive intellectuals, exulting in the triumph of their creed and their own place in it, as a result of America's entry into World War I. Unfortunately, limitations of space and time preclude dealing with all facets of the wartime activity of progressive intellectuals; in particular, I regret having to omit treatment of the conscription movement, a fascinating example of the creed of the "therapy" of "discipline" led by upper-class intellectuals and businessmen in the J.P. Morgan ambit.<a href="#note4" name="ref4" id="ref4">[4]</a> I shall also have to omit both the highly significant trooping to the war colors of the nation's preachers, and the wartime impetus toward the permanent centralization of scientific research.<a href="#note5" name="ref5" id="ref5">[5]</a></p>
<p>There is no better epigraph for the remainder of this paper than a congratulatory note sent to President Wilson after the delivery of his war message on April 2, 1917. The note was sent by Wilson's son-in-law and fellow Southern pietist and progressive, Secretary of the Treasury William Gibbs McAdoo, a man who had spent his entire life as an industrialist in New York City, solidly in the J.P. Morgan ambit. McAdoo wrote to Wilson: "You have done a great thing nobly! I firmly believe that it is God's will that America should do this transcendent service for humanity throughout the world and that you are His chosen instrument."<a href="#note6" name="ref6" id="ref6">[6]</a> It was not a sentiment with which the president could disagree.</p>
<h4 id="2" name="2">II. Pietism and Prohibition</h4>
<p>One of the few important omissions in Professor Higgs's book is the crucial role of postmillennial pietist Protestantism in the drive toward statism in the United States. Dominant in the "Yankee" areas of the North from the 1830s on, the aggressive "evangelical" form of pietism conquered Southern Protestantism by the 1890s and played a crucial role in progressivism after the turn of the century and through World War I. Evangelical pietism held that requisite to any man's salvation is that he do his best to see to it that everyone else is saved, and doing one's best inevitably meant that the State must become a crucial instrument in maximizing people's chances for salvation. In particular, the State plays a pivotal role in stamping out sin, and in "making America holy."</p>
<p>To the pietists, sin was very broadly defined as any force that might cloud men's minds so that they could not exercise their theological free will to achieve salvation. Of particular importance were slavery (until the Civil War), Demon Rum, and the Roman Catholic Church, headed by the Antichrist in Rome. For decades after the Civil War, "rebellion" took the place of slavery in the pietist charges against their great political enemy, the Democratic party.<a href="#note7" name="ref7" id="ref7">[7]</a> Then in 1896, with the evangelical conversion of Southern Protestantism and the admission to the Union of the sparsely populated and pietist Mountain states, William Jennings Bryan was able to put together a coalition that transformed the Democrats into a pietist party and ended forever that party's once proud role as the champion of "liturgical" (Catholic and High German Lutheran) Christianity and of personal liberty and laissez faire.<a href="#note8" name="ref8" id="ref8">[8]</a><a href="#note9" name="ref9" id="ref9">[9]</a></p>
<p>The pietists of the nineteenth and early twentieth centuries were all postmillennialist: They believed that the Second Advent of Christ will occur only after the millennium — a thousand years of the establishment of the Kingdom of God on earth — has been brought about by human effort. Postmillennialists have therefore tended to be statists, with the State becoming an important instrument of stamping out sin and Christianizing the social order so as to speed Jesus' return.<a href="#note10" name="ref10" id="ref10">[10]</a></p>
<p>Professor Timberlake neatly sums up this politico-religious conflict:</p>
<blockquote><p>Unlike those extremist and apocalyptic sects that rejected and withdrew from the world as hopelessly corrupt, and unlike the more conservative churches, such as the Roman Catholic, Protestant Episcopal, and Lutheran, that tended to assume a more relaxed attitude toward the influence of religion in culture, evangelical Protestantism sought to overcome the corruption of the world in a dynamic manner, not only by converting men to belief in Christ but also by Christianizing the social order through the power and force of law. According to this view, the Christian's duty was to use the secular power of the state to transform culture so that the community of the faithful might be kept pure and the work of saving the unregenerate might be made easier. Thus the function of law was not simply to restrain evil but to educate and uplift.<a href="#note11" name="ref11" id="ref11">[11]</a></p></blockquote>
<p>Both prohibition and progressive reform were pietistic, and as both movements expanded after 1900 they became increasingly intertwined. The Prohibition Party, once confined — at least in its platform — to a single issue, became increasingly and frankly progressive after 1904. The Anti-Saloon League, the major vehicle for prohibitionist agitation after 1900, was also markedly devoted to progressive reform. Thus at the League's annual convention in 1905, Rev. Howard H. Russell rejoiced in the growing movement for progressive reform and particularly hailed Theodore Roosevelt, as that "leader of heroic mould, of absolute honesty of character and purity of life, that foremost man of this world…."<a href="#note12" name="ref12" id="ref12">[12]</a> At the Anti-Saloon League's convention of 1909, Rev. Purley A. Baker lauded the labor union movement as a holy crusade for justice and a square deal. The League's 1915 convention, which attracted 10,000 people, was noted for the same blend of statism, social service, and combative Christianity that had marked the national convention of the Progressive Party in 1912.<a href="#note13" name="ref13" id="ref13">[13]</a> And at the League's June 1916 convention, Bishop Luther B. Wilson stated, without contradiction, that everyone present would undoubtedly hail the progressive reforms then being proposed.</p>
<p>During the Progressive years, the Social Gospel became part of the mainstream of pietist Protestantism. Most of the evangelical churches created commissions on social service to promulgate the Social Gospel, and virtually all of the denominations adopted the Social Creed drawn up in 1912 by the Commission of the Church and Social Service of the Federal Council of Churches. The creed called for the abolition of child labor, the regulation of female labor, the right of labor to organize (i.e., compulsory collective bargaining), the elimination of poverty, and an "equitable" division of the national product. And right up there as a matter of social concern was the liquor problem. The creed maintained that liquor was a grave hindrance toward the establishment of the Kingdom of God on earth, and it advocated the "protection of the individual and society from the social, economic, and moral waste of the liquor traffic.<a href="#note14" name="ref14" id="ref14">[14]</a></p>
<p>The Social Gospel leaders were fervent advocates of statism and of prohibition. These included Rev. Walter Rauschenbusch and Rev. Charles Stelzle, whose tract <em>Why Prohibition!</em> (1918) was distributed, after the United States' entry into World War I, by the Commission on Temperance of the Federal Council of Churches to labor leaders, members of Congress, and important government officials. A particularly important Social Gospel leader was Rev. Josiah Strong, whose monthly journal, <em>The Gospel of the Kingdom</em>, was published by Strong's American Institute of Social Service. In an article supporting prohibition in the July 1914 issue, The Gospel of the Kingdom hailed the progressive spirit that was at last putting an end to "personal liberty":</p>
<blockquote><p>"Personal Liberty" is at last an uncrowned, dethroned king, with no one to do him reverence. The social consciousness is so far developed. and is becoming so autocratic, that institutions and governments must give heed to its mandate and share their life accordingly. We are no longer frightened by that ancient bogy — "paternalism in government." We affirm boldly, it is the business of government to be just that — Paternal. <em>Nothing human can be foreign to a true government</em>.<a href="#note15" name="ref15" id="ref15">[15]</a></p></blockquote>
<p>As true crusaders, the pietists were not content to stop with the stamping out of sin in the United States alone. If American pietism was convinced that Americans were God's chosen people, destined to establish a Kingdom of God within the United States, surely the pietists' religious and moral duty could not stop there. In a sense, the world was America's oyster. As Professor Timberlake put it, once the Kingdom of God was in the course of being established in the United States, "it was therefore America's mission to spread these ideals and institutions abroad so that the Kingdom could be established throughout the world. American Protestants were accordingly not content merely to work for the kingdom of God in America, but felt compelled to assist in the reformation of the rest of the world also."<a href="#note16" name="ref16" id="ref16">[16]</a></p>
<p>American entry into World War I provided the fulfillment of prohibitionist dreams. In the first place, all food production was placed under the control of Herbert Hoover, Food Administration czar. But if the US government was to control and allocate food resources, shall it permit the precious scarce supply of grain to be siphoned off into the "waste," if not the sin, of the manufacture of liquor? Even though less than two percent of American cereal production went into the manufacture of alcohol, think of the starving children of the world who might otherwise be fed. As the progressive weekly <em>The Independent</em> demagogically phrased it. "Shall the many have food, or the few have drink?" For the ostensible purpose of "conserving" grain, Congress wrote an amendment into the Lever Food and Fuel Control Act of August 10, 1917, that absolutely prohibited the use of foodstuffs, hence grain, in the production of alcohol. Congress would have added a prohibition on the manufacture of wine or beer, but President Wilson persuaded the Anti-Saloon League that he could accomplish the same goal more slowly and thereby avoid a delaying filibuster by the wets in Congress. However, Herbert Hoover, a progressive and a prohibitionist, persuaded Wilson to issue an order, on December 8, both greatly reducing the alcoholic content of beer and limiting the amount of foodstuffs that could be used in its manufacture.<a href="#note17" name="ref17" id="ref17">[17]</a></p>
<p>The prohibitionists were able to use the Lever Act and war patriotism to good effect. Thus, Mrs. W. E. Lindsey, wife of the governor of New Mexico, delivered a speech in November 1917 that noted the Lever Act, and declared:</p>
<blockquote><p>Aside from the long list of awful tragedies following in the wake of the liquor traffic, the economic waste is too great to be tolerated at this time. With so many people of the allied nations near to the door of starvation, it would be criminal ingratitude for us to continue the manufacture of whiskey.<a href="#note18" name="ref18" id="ref18">[18]</a></p></blockquote>
<p>Another rationale for prohibition during the war was the alleged necessity to protect American soldiers from the dangers of alcohol to their health, their morals, and their immortal souls. As a result, in the Selective Service Act of May 18, 1917, Congress provided that dry zones must be established around every army base, and it was made illegal to sell or even to give liquor to any member of the military establishment within those zones, even in one's private home. Any inebriated servicemen were subject to courts-martial.</p>
<p>But the most severe thrust toward national prohibition was the Anti-Saloon League's proposed eighteenth constitutional amendment, outlawing the manufacture, sale, transportation, import or export of all intoxicating liquors. It was passed by Congress and submitted to the states at the end of December 1917. Wet arguments that prohibition would prove unenforceable were met with the usual dry appeal to high principle: Should laws against murder and robbery he repealed simply because they cannot be completely enforced? And arguments that private property would be unjustly confiscated were also brushed aside with the contention that property injurious to the health, morals, and safety of the people had always been subject to confiscation without compensation.</p>
<p>When the Lever Act made a distinction between hard liquor (forbidden) and beer and wine (limited), the brewing industry tried to save their skins by cutting themselves loose from the taint of distilled spirits. "The true relationship with beer," insisted the United States Brewers Association, "is with light wines and soft drinks-not with hard liquors." The brewers affirmed their desire to "sever, once for all, the shackles that bound our wholesome productions to ardent spirits." But this craven attitude would do the brewers no good. After all, one of the major objectives of the drys was to smash the brewers, once and for all, they whose product was the very embodiment of the drinking habits of the hated German-American masses, both Catholic and Lutheran, liturgicals and beer drinkers all. German-Americans were now fair game. Were they not all agents of the satanic Kaiser, bent on conquering the world? Were they not conscious agents of the dreaded Hun <em>Kultur</em>, out to destroy American civilization? And were not most brewers German?</p>
<p>And so the Anti-Saloon League thundered that "German brewers in this country have rendered thousands of men inefficient and are thus crippling the Republic in its war on Prussian militarism." Apparently, the Anti-Saloon League took no heed of the work of German brewers in Germany, who were presumably performing the estimable service of rendering "Prussian militarism" helpless. The brewers were accused of being pro-German, and of subsidizing the press (apparently it was all right to be pro-English or to subsidize the press if one were not a brewer). The acme of the accusations came from one prohibitionist: "We have German enemies," he warned, "in this country too. And the worst of all our German enemies, the most treacherous, the most menacing are Pabst, Schlitz, Blatz, and Miller."<a href="#note19" name="ref19" id="ref19">[19]</a></p>
<p>In this sort of atmosphere, the brewers didn't have a chance, and the Eighteenth Amendment went to the states, outlawing all forms of liquor. Since twenty-seven states had already outlawed liquor, this meant that only nine more were needed to ratify this remarkable amendment, which directly involved the federal constitution in what had always been, at most, a matter of police power of the states. The thirty-sixth state ratified the Eighteenth Amendment on January 16, 1919, and by the end of February all but three states (New Jersey, Rhode Island, and Connecticut) had made liquor unconstitutional as well as illegal. Technically, the amendment went into force the following January, but Congress speeded matters up by passing the War Prohibition Act of November 11, 1918, which banned the manufacture of beer and wine after the following May and outlawed the sale of all intoxicating beverages after June 30, 1919, a ban to continue in effect until the end of demobilization. Thus total national prohibition really began on July 1, 1919, with the Eighteenth Amendment taking over six months later. The constitutional amendment needed a congressional enforcing act, which Congress supplied with the Volstead (or National Prohibition) Act, passed over Wilson's veto at the end of October 1919.</p>
<p>With the battle against Demon Rum won at home, the restless advocates of pietist prohibitionism looked for new lands to conquer. Today America, tomorrow the world. In June 1919 the triumphant Anti-Saloon League called an international prohibition conference in Washington and created a World League Against Alcoholism. World prohibition, after all, was needed to finish the job of making the world safe for democracy. The prohibitionists' goals were fervently expressed by Rev. A.C. Bane at the Anti-Saloon League's 1917 convention, when victory in America was already in sight. To a wildly cheering throng, Bane thundered:</p>
<blockquote><p>America will "go over the top" in humanity's greatest battle [against liquor] and plant the victorious white standard of Prohibition upon the nation's loftiest eminence. Then catching sight of the beckoning hand of our sister nations across the sea, struggling with the same age-long foe, we will go forth with the spirit of the missionary and the crusader to help drive the demon of drink from all civilization. With America leading the way, with faith in Omnipotent God, and bearing with patriotic hands our stainless flag, the emblem of civic purity, we will soon bestow upon mankind the priceless gift of World Prohibition.<a href="#note20" name="ref20" id="ref20">[20]</a></p></blockquote>
<p>Fortunately, the prohibitionists found the reluctant world a tougher nut to crack.</p>
<h4 id="3" name="3">III. Women at War and at the Polls</h4>
<p>Another direct outgrowth of World War I, coming in tandem with prohibition but lasting more permanently, was the Nineteenth Amendment, submitted by Congress in 1919 and ratified by the following year, which allowed women to vote. Women's suffrage had long been a movement directly allied with prohibition. Desperate to combat a demographic trend that seemed to be going against them, the evangelical pietists called for women's suffrage (and enacted it in many Western states). They did so because they knew that while pietist women were socially and politically active, ethnic or liturgical women tended to be culturally bound to hearth and home and therefore far less likely to vote.</p>
<p>Hence, women's suffrage would greatly increase pietist voting power. In 1869 the Prohibitionist Party became the first party to endorse women's suffrage, which it continued to do. The Progressive Party was equally enthusiastic about female suffrage; it was the first major national party to permit women delegates at its conventions. A leading women's suffrage organization was the Women's Christian Temperance Union, which reached an enormous membership of 300,000 by 1900. And three successive presidents of the major women's suffrage group, the National American Woman Suffrage Association — Susan B. Anthony, Mrs. Carrie Chapman Catt, and Dr. Anna Howard Shaw — all began their activist careers as prohibitionists. Susan B. Anthony put the issue clearly:</p>
<blockquote><p>There is an enemy of the homes of this nation and that enemy is drunkenness. Everyone connected with the gambling house, the brothel and the saloon works and votes solidly against the enfranchisement of women, and, I say, if you believe in chastity, if you believe in honesty and integrity, then take the necessary steps to put the ballot in the hands of women.<a href="#note21" name="ref21" id="ref21">[21]</a></p></blockquote>
<p>For its part, the German-American Alliance of Nebraska sent out an appeal during the unsuccessful referendum in November 1914 on women suffrage. Written in German, the appeal declared, "Our German women do not want the right to vote, and since our opponents desire the right of suffrage mainly for the purpose of saddling the yoke of prohibition on our necks, we should oppose it with all our might…."<a href="#note22" name="ref22" id="ref22">[22]</a></p>
<p>America's entry into World War I provided the impetus for overcoming the substantial opposition to woman suffrage, as a corollary to the success of prohibition and as a reward for the vigorous activity by organized women in behalf of the war effort. To close the loop, much of that activity consisted in stamping out vice and alcohol as well as instilling "patriotic" education into the minds of often suspect immigrant groups.</p>
<p>Shortly after the US declaration of war, the Council of National Defense created an Advisory Committee on Women's Defense Work, known as the Woman's Committee. The purpose of the committee, writes a celebratory contemporary account, was "to coordinate the activities and the resources of the organized and unorganized women of the country, that their power may be immediately utilized in time of need, and to supply a new and direct channel of cooperation between women and governmental department."<a href="#note23" name="ref23" id="ref23">[23]</a> Chairman of the Woman's Committee, working energetically and full time, was the former president of the National American Woman Suffrage Association, Dr. Anna Howard Shaw, and another leading member was the suffrage group's current chairman and an equally prominent suffragette, Mrs. Carrie Chapman Catt.</p>
<p>The Woman's Committee promptly set up organizations in cities and states across the country, and on June 19, 1917 convened a conference of over fifty national women's organizations to coordinate their efforts. It was at this conference that "the first definite task was imposed upon American women" by the indefatigable Food Czar, Herbert Hoover.<a href="#note24" name="ref24" id="ref24">[24]</a> Hoover enlisted the cooperation of the nation's women in his ambitious campaign for controlling, restricting, and cartelizing the food industry in the name of "conservation" and elimination of "waste." Celebrating this coming together of women was one of the Woman's Committee members, the Progressive writer and muckraker Mrs. Ida M. Tarbell. Mrs. Tarbell lauded the "growing consciousness everywhere that this great enterprise for democracy which we are launching [the US entry into the war] is a national affair, and if an individual or a society is going to do its bit it must act with and under the government at Washington." "Nothing else," Mrs. Tarbell gushed, "can explain the action of the women of the country in coming together as they are doing today under one centralized direction."<a href="#note25" name="ref25" id="ref25">[25]</a></p>
<p>Mrs. Tarbell's enthusiasm might have been heightened by the fact that she was one of the directing rather than the directed. Herbert Hoover came to the women's conference with the proposal that each of the women sign and distribute a "food pledge card" on behalf of food conservation. While support for the food pledge among the public was narrower than anticipated, educational efforts to promote the pledge became the basis of the remainder of the women's conservation campaign. The Woman's Committee appointed Mrs. Tarbell as chairman of its committee on Food Administration, and she not only tirelessly organized the campaign but also wrote many letters and newspaper and magazine articles on its behalf.</p>
<p>In addition to food control, another important and immediate function of the Woman's Committee was to attempt to register every woman in the country for possible volunteer or paid work in support of the war effort. Every woman aged sixteen or over was asked to sign and submit a registration card with all pertinent information, including training, experience, and the sort of work desired. In that way the government would know the whereabouts and training of every woman, and government and women could then serve each other best. In many states, especially Ohio and Illinois, state governments set up schools to train the registrars. And even though the Woman's Committee kept insisting that the registration was completely voluntary, the state of Louisiana, as Ida Clarke puts it, developed a "novel and clever" idea to facilitate the program: women's registration was made compulsory.</p>
<p>Louisiana's Governor Ruftin G. Pleasant decreed October 17, 1917 compulsory registration day, and a host of state officials collaborated in its operation. The State Food Commission made sure that food pledges were also signed by all, and the State School Board granted a holiday on October 17 so that teachers could assist in the compulsory registration, especially in the rural districts. Six thousand women were officially commissioned by the state of Louisiana to conduct the registration, and they worked in tandem with state Food Conservation officials and parish Demonstration Agents. In the French areas of the state, the Catholic priests rendered valuable aid in personally appealing to all their female parishioners to perform their registration duties. Handbills were circulated in French, house-to-house canvasses were made, and speeches urging registration were made by women activists in movie theaters, schools, churches, and courthouses. We are informed that all responses were eager and cordial; there is no mention of any resistance. We are also advised that "even the negroes were quite alive to the situation, meeting sometimes with the white people and sometimes at the call of their own pastors."<a href="#note26" name="ref26" id="ref26">[26]</a></p>
<p>Also helping out in women's registration and food control was another, smaller, but slightly more sinister women's organization that had been launched by Congress as a sort of prewar wartime group at a large Congress for Constructive Patriotism, held in Washington, D.C. in late January 1917. This was the National League for Woman's Service (NLWS), which established a nationwide organization later overshadowed and overlapped by the larger Woman's Committee. The difference was that the NLWS was set up on quite frankly military lines. Each local working unit was called a "detachment" under a "detachment commander," district-wide and state-wide detachments met in annual "encampments," and every woman member was to wear a uniform with an organization badge and insignia. In particular, "the basis of training for all detachments is standardized, physical drill."<a href="#note27" name="ref27" id="ref27">[27]</a></p>
<p>A vital part of the Woman's Committee work was engaging in "patriotic education." The government and the Woman's Committee recognized that immigrant ethnic women were most in need of such vital instruction, and so it set up a committee on education, headed by the energetic Mrs. Carrie Chapman Catt. Mrs. Catt stated the problem well to the Woman's Committee: Millions of people in the United States were unclear on why we were at war, and why, as Ida Clarke paraphrases Mrs. Can, there is "the imperative necessity of winning the war if future generations were to be protected from the menace of an unscrupulous militarism."<a href="#note28" name="ref28" id="ref28">[28]</a> Presumably US militarism, being "scrupulous," posed no problem.</p>
<p>Apathy and ignorance abounded, Mrs. Catt went on, and she proposed to mobilize twenty million American women, the "greatest sentiment makers of any community," to begin a "vast educational movement" to get the women "fervently enlisted to push the war to victory as rapidly as possible." As Mrs. Catt continued, however, the clarity of war aims she called for really amounted to pointing out that we were in the war "whether the nation likes it or does not like it," and that therefore the "sacrifices" needed to win the war "willingly or unwillingly must be made." These statements are reminiscent of arguments supporting recent military actions by Ronald Reagan ("He had to do what he had to do"). In the end, Mrs. Catt could come up with only one reasoned argument for the war, apart from this alleged necessity, that it must be won to make it "the war to end war."<a href="#note29" name="ref29" id="ref29">[29]</a></p>
<p>The "patriotic education" campaign of the organized women was largely to "Americanize" immigrant women by energetically persuading them (a) to become naturalized American citizens and (b) to learn "Mother English." In the campaign, dubbed "America First," national unity was promoted through getting immigrants to learn English and trying to get female immigrants into afternoon or evening English classes. The organized patriot women were also worried about preserving the family structure of the immigrants. If the children learn English and their parents remain ignorant, children will scorn their elders, "parental discipline and control are dissipated, and the whole family fabric becomes weakened. Thus one of the great conservative forces in the community becomes inoperative." To preserve "maternal control of the young," then, "Americanization of the foreign women through language becomes imperative." In Erie, Pennsylvania, women's clubs appointed "Block Matrons," whose job it was to get to know the foreign families of the neighborhood and to back up school authorities in urging the immigrants to learn English, and who, in the rather naive words of Ida Clarke, "become neighbors, friends, and veritable mother confessors to the foreign women of the block." One would like to have heard some comments from recipients of the attentions of the Block Matrons.</p>
<p>All in all, as a result of the Americanization campaign, Ida Clarke concludes, "the organized women of this country can play an important part in making ours a country with a common language, a common purpose, a common set of ideals — a unified America."<a href="#note30" name="ref30" id="ref30">[30]</a></p>
<p>Neither did the government and its organized women neglect progressive economic reforms. At the organizing June 1917 conference of the Woman's Committee, Mrs. Carrie Catt emphasized that the greatest problem of the war was to assure that women receive "equal pay for equal work." The conference suggested that vigilance committees be established to guard against the violation of "ethical laws" governing labor and also that all laws restricting ("protecting") the labor of women and children be rigorously enforced. Apparently, there were some values to which maximizing production for the war effort had to take second place.</p>
<p>Mrs. Margaret Dreier Robins, president of the National Women's Trade Union's League, hailed the fact that the Woman's Committee was organizing committees in every state to protect minimum standards for women and children's labor in industry and demanded minimum wages and shorter hours for women. Mrs. Robins particularly warned that "not only are unorganized women workers in vast numbers used as underbidders in the labor market for lowering industrial standards, but they are related to those groups in industrial centers of our country that are least Americanized and most alien to our institutions and ideals." And so "Americanization" and cartelization of female labor went hand in hand.<a href="#note31" name="ref31" id="ref31">[31]</a><a href="#note32" name="ref32" id="ref32">[32]</a></p>
<h4 id="4" name="4">IV. Saving Our Boys from Alcohol and Vice</h4>
<p>One of organized womanhood's major contributions to the war effort was to collaborate in an attempt to save American soldiers from vice and Demon Rum. In addition to establishing rigorous dry zones around every military camp in the United States, the Selective Service Act of May 1917 also outlawed prostitution in wide zones around the military camps. To enforce these provisions, the War Department had ready at hand a Commission on Training Camp Activities, an agency soon imitated by the Department of the Navy. Both commissions were headed by a man tailor-made for the job, the progressive New York settlement-house worker, municipal political reformer, and former student and disciple of Woodrow Wilson, Raymond Blaine Fosdick.</p>
<p>Fosdick's background, life, and career were paradigmatic for progressive intellectuals and activists of that era. Fosdick's ancestors were Yankees from Massachusetts and Connecticut, and his great-grandfather pioneered westward in a covered wagon to become a frontier farmer in the heart of the Burned-Over District of transplanted Yankees, Buffalo, New York. Fosdick's grandfather, a pietist lay preacher born again in a Baptist revival, was a prohibitionist who married a preacher's daughter and became a lifelong public school teacher in Buffalo. Grandfather Fosdick rose to become Superintendent of Education in Buffalo and a battler for an expanded and strengthened public school system. Fosdick's immediate ancestry continued in the same vein. His father was a public school teacher in Buffalo who rose to become principal of a high school. His mother was deeply pietist and a staunch advocate of prohibition and women's suffrage. Fosdick's father was a devout pietist Protestant and a "fanatical" Republican who gave his son Raymond the middle name of his hero, the veteran Maine Republican James G. Blaine. The three Fosdick children, elder brother Harry Emerson, Raymond, and Raymond's twin sister, Edith, on emerging from this atmosphere, all forged lifetime careers of pietism and social service.</p>
<p>While active in New York reform administration, Fosdick made a fateful friendship. In 1910, John D. Rockefeller, Jr., like his father a pietist Baptist, was chairman of a special grand jury to investigate and to try to stamp out prostitution in New York City. For Rockefeller, the elimination of prostitution was to become an ardent and lifelong crusade. He believed that sin, such as prostitution, must be criminated, quarantined, and driven underground through rigorous suppression.</p>
<p>In 1911, Rockefeller began his crusade by setting up the Bureau of Social Hygiene, into which he poured $5 million in the next quarter century. Two years later he enlisted Fosdick, already a speaker at the annual dinner of Rockefeller's Baptist Bible class, to study police systems in Europe in conjunction with activities to end the great "social vice." Surveying American police after his stint in Europe at Rockefeller's behest, Fosdick was appalled that police work in the United States was not considered a "science" and that it was subject to "sordid" political influences.<a href="#note33" name="ref33" id="ref33">[33]</a></p>
<p>At that point, the new Secretary of War, the progressive former mayor of Cleveland Newton D. Baker, became disturbed at reports that areas near the army camps in Texas on the Mexican border, where troops were mobilized to combat the Mexican revolutionary Pancho Villa, were honeycombed with saloons and prostitution. Sent by Baker on a fact-finding tour in the summer of 1916, scoffed at by tough army officers as the "Reverend," Fosdick was horrified to find saloons and brothels seemingly everywhere in the vicinity of the military camps. He reported his consternation to Baker, and, at Fosdick's suggestion, Baker cracked down on the army commanders and their lax attitude toward alcohol and vice. But Fosdick was beginning to get the glimmer of another idea. Couldn't the suppression of the bad be accompanied by a positive encouragement of the good, of wholesome recreational alternatives to sin and liquor that our boys could enjoy? When war was declared, Baker quickly appointed Fosdick to be chairman of the Commission on Training Camp Activities.</p>
<p>Armed with the coercive resources of the federal government and rapidly building his bureaucratic empire from merely one secretary to a staff of thousands, Raymond Fosdick set out with determination on his twofold task: stamping out alcohol and sin in and around every military camp, and filling the void for American soldiers and sailors by providing them with wholesome recreation. As head of the Law Enforcement Division of the Training Camp Commission, Fosdick selected Bascom Johnson, attorney for the American Social Hygiene Association.<a href="#note34" name="ref34" id="ref34">[34]</a> Johnson was commissioned a major, and his staff of forty aggressive attorneys became second lieutenants.</p>
<p>Employing the argument of health and military necessity, Fosdick set up a Social Hygiene Division of his commission, which promulgated the slogan "Fit to Fight." Using a mixture of force and threats to remove federal troops from the bases if recalcitrant cities did not comply, Fosdick managed to bludgeon his way into suppressing, if not prostitution in general, then at least every major red light district in the country. In doing so, Fosdick and Baker, employing local police and the federal Military Police, far exceeded their legal authority. The law authorized the president to shut down every red light district in a five-mile zone around each military camp or base. Of the 110 red light districts shut down by military force, however, only 35 were included in the prohibited zone. Suppression of the other 75 was an illegal extension of the law. Nevertheless, Fosdick was triumphant: "Through the efforts of this Commission [on Training Camp Activities] the red light district has practically ceased to be a feature of American city life."<a href="#note35" name="ref35" id="ref35">[35]</a> The result of this permanent destruction of the red light district, of course, was to drive prostitution onto the streets, where consumers would be deprived of the protection of either an open market or of regulation.</p>
<p>In some cases, the federal anti-vice crusade met considerable resistance. Secretary of Navy Josephus Daniels, a progressive from North Carolina, had to call out the marines to patrol the streets of resistant Philadelphia, and naval troops, over the strenuous objections of the mayor, were used to crush the fabled red light district of Storyville, in New Orleans, in November 1917.<a href="#note36" name="ref36" id="ref36">[36]</a></p>
<p>In its hubris, the US Army decided to extend its anti-vice crusade to foreign shores. General John J. Pershing issued an official bulletin to members of the American Expeditionary Force in France urging that "sexual continence is the plain duty of members of the A.E.F., both for the vigorous conduct of the war, and for the clean health of the American people after the war." Pershing and the American military tried to close all the French brothels in areas where American troops were located, but the move was unsuccessful because the French objected bitterly. Premier Georges Clemenceau pointed out that the result of the "total prohibition of regulated prostitution in the vicinity of American troops" was only to increase "venereal diseases among the civilian population of the neighborhood." Finally, the United States had to rest content with declaring French civilian areas off limits to the troops.<a href="#note37" name="ref37" id="ref37">[37]</a></p>
<p>The more positive part of Raymond Fosdick's task during the war was supplying the soldiers and sailors with a constructive substitute for sin and alcohol, "healthful amusements and wholesome company." As might be expected, the Woman's Committee and organized womanhood collaborated enthusiastically. They followed the injunction of Secretary of War Baker that the government "cannot allow these young men to be surrounded by a vicious and demoralizing environment, nor can we leave anything undone which will protect them from unhealthy influences and crude forms of temptation." The Woman's Committee found, however, that in the great undertaking of safeguarding the health and morals of our boys, their most challenging problem proved to be guarding the morals of their mobilized young girls. For unfortunately, "where soldiers are stationed the problem of preventing girls from being misled by the glamour and romance of war and beguiling uniforms looms large.'' Fortunately, perhaps, the Maryland Committee proposed the establishment of a "Patriotic League of Honor which will inspire girls to adopt the highest standards of womanliness and loyalty to their country."<a href="#note38" name="ref38" id="ref38">[38]</a></p>
<p>No group was more delighted with the achievements of Fosdick and his Military Training Camp Commission than the burgeoning profession of social work. Surrounded by handpicked aides from the Playground and Recreation Association and the Russell Sage Foundation, Fosdick and the others "in effect tried to create a massive settlement house around each camp. No army had ever seen anything like it before, but it was an outgrowth of the recreation and community organization movement, and a victory for those who had been arguing for the creative use of leisure time."<a href="#note39" name="ref39" id="ref39">[39]</a> The social work profession pronounced the program an enormous success. The influential <em>Survey</em> magazine summed up the result as "the most stupendous piece of social work in modern times."<a href="#note40" name="ref40" id="ref40">[40]</a></p>
<p>Social workers were also exultant about prohibition. In 1917, the National Conference of Charities and Corrections (which changed its name around the same time to the National Conference of Social Work) was emboldened to drop whatever value-free pose it might have had and come out squarely for prohibition. On returning from Russia in 1917, Edward T. Devine of the Charity Organization Society of New York exclaimed that "the social revolution which followed the prohibition of vodka was more profoundly important than the political revolution which abolished autocracy." And Robert A. Woods of Boston, the Grand Old Man of the settlement house movement and a veteran advocate of prohibition, predicted in 1919 that the Eighteenth Amendment, "one of the greatest and best events in history," would reduce poverty, wipe out prostitution and crime, and liberate "vast suppressed human potentialities."<a href="#note41" name="ref41" id="ref41">[41]</a></p>
<p>Woods, president of the National Conference of Social Work during 1917–18, had long denounced alcohol as "an abominable evil." A postmillennial pietist, he believed in "Christian statesmanship" that would, in a "propaganda of the deed," Christianize the social order in a corporate, communal route to the glorification of God. Like many pietists, Woods cared not for creeds or dogmas but only for advancing Christianity in a communal way; though an active Episcopalian, his "parish" was the community at large. In his settlement work, Woods had long favored the isolation or segregation of the "unfit," in particular "the tramp, the drunkard, the pauper, the imbecile," with the settlement house as the nucleus of this reform. Woods was particularly eager to isolate and punish the drunkard and the tramp. "Inveterate drunkards" were to receive increasing levels of "punishment," with ever-lengthier jail terms. The "tramp evil" was to be gotten rid of by rounding up and jailing vagrants, who would be placed in tramp workhouses and put to forced labor.</p>
<p>For Woods the world war was a momentous event. It had advanced the process of "Americanization," a "great humanizing process through which all loyalties, all beliefs must be wrought together in a better order."<a href="#note42" name="ref42" id="ref42">[42]</a> The war had wonderfully released the energies of the American people. Now, however, it was important to carry the wartime momentum into the postwar world. Lauding the war collectivist society during the spring of 1918, Robert Woods asked the crucial question, "Why should it not always be so? Why not continue in the years of peace this close, vast, wholesome organism of service, of fellowship, of constructive creative power?"<a href="#note43" name="ref43" id="ref43">[43]</a></p>
<h4 id="5" name="5">V. The <em>New Republic</em> Collectivists</h4>
<p>The <em>New Republic</em> magazine, founded in 1914 as the leading intellectual organ of progressivism, was a living embodiment of the burgeoning alliance between big-business interests, in particular the House of Morgan, and the growing legion of collectivist intellectuals. Founder and publisher of the <em>New Republic</em> was Willard W. Straight, partner of J.P. Morgan & Co., and its financier was Straight's wife, the heiress Dorothy Whitney. Major editor of the influential new weekly was the veteran collectivist and theoretician of Teddy Roosevelt's New Nationalism, Herbert David Croly. Croly's two coeditors were Walter Edward Weyl, another theoretician of the New Nationalism, and the young, ambitious former official of the Intercollegiate Socialist Society, the future pundit Walter Lippmann. As Woodrow Wilson began to take America into World War I, the <em>New Republic</em>, though originally Rooseveltian, became an enthusiastic supporter of the war, and a virtual spokesman for the Wilson war effort, the wartime collectivist economy, and the new society molded by the war.</p>
<p>On the higher levels of ratiocination, unquestionably the leading progressive intellectual, before, during, and after World War I, was the champion of pragmatism, Professor John Dewey of Columbia University. Dewey wrote frequently for the <em>New Republic</em> in this period and was clearly its leading theoretician. A Yankee born in 1859, Dewey was, as Mencken put it, "of indestructible Vermont stock and a man of the highest bearable sobriety." John Dewey was the son of a small town Vermont grocer.<a href="#note44" name="ref44" id="ref44">[44]</a> Although he was a pragmatist and a secular humanist most of his life, it is not as well known that Dewey, in the years before 1900, was a postmillennial pietist, seeking the gradual development of a Christianized social order and Kingdom of God on earth via the expansion of science, community, and the State. During the 1890s, Dewey, as professor of philosophy at the University of Michigan, expounded his vision of postmillennial pietism in a series of lectures before the Students' Christian Association. Dewey argued that the growth of modem science now makes it possible for man to establish the biblical idea of the Kingdom of God on earth. Once humans had broken free of the restraints of orthodox Christianity, a truly religious Kingdom of God could be realized in "the common incarnate Life, the purpose animating all men and binding them together into one harmonious whole of sympathy."<a href="#note45" name="ref45" id="ref45">[45]</a></p>
<p>Religion would thus work in tandem with science and democracy, all of which would break down the barriers between men and establish the Kingdom. After 1900 it was easy for John Dewey, along with most other postmillennial intellectuals of the period, to shift gradually but decisively from postmillennial progressive Christian statism to progressive secular statism. The path, the expansion of statism and "social control" and planning, remained the same. And even though the Christian creed dropped out of the picture, the intellectuals and activists continued to possess the same evangelical zeal for the salvation of the world that their parents and they themselves had once possessed. The world would and must still be saved through progress and statism.<a href="#note46" name="ref46" id="ref46">[46]</a></p>
<p>A pacifist while in the midst of peace, John Dewey prepared himself to lead the parade for war as America drew nearer to armed intervention in the European struggle. First, in January 1916 in the New Republic, Dewey attacked the "professional pacifist's" outright condemnation of war as a "sentimental phantasy," a confusion of means and ends. Force, he declared, was simply "a means of getting results," and therefore would neither be lauded or condemned per se. Next, in April Dewey signed a pro-Allied manifesto, not only cheering for an Allied victory but also proclaiming that the Allies were "struggling to preserve the liberties of the world and the highest ideals of civilization." And though Dewey supported US entry into the war so that Germany could be defeated, "a hard job, but one which had to be done," he was far more interested in the wonderful changes that the war would surely bring about in the domestic American polity. In particular, war offered a golden opportunity to bring about collectivist social control in the interest of social justice. As one historian put it,</p>
<blockquote><p>because war demanded paramount commitment to the national interest and necessitated an unprecedented degree of government planning and economic regulation in that interest, Dewey saw the prospect of permanent socialization, permanent replacement of private and possessive interest by public and social interest, both within and among nations.<a href="#note47" name="ref47" id="ref47">[47]</a></p></blockquote>
<p>In an interview with the <em>New York World</em> a few months after US entry into the war, Dewey exulted that "this war may easily be the beginning of the end of business." For out of the needs of the war, "we are beginning to produce for use, not for sale, and the capitalist is not a capitalist [in the face of] the war." Capitalist conditions of production and sale are now under government control, and "there is no reason to believe that the old principle will ever be resumed…. Private property had already lost its sanctity …industrial democracy is on the way."<a href="#note48" name="ref48" id="ref48">[48]</a></p>
<p>In short, intelligence is at last being used to tackle social problems, and this practice is destroying the old order and creating a new social order of "democratic integrated control." Labor is acquiring more power, science is at last being socially mobilized, and massive government controls are socializing industry. These developments, Dewey proclaimed, were precisely what we are fighting for.<a href="#note49" name="ref49" id="ref49">[49]</a></p>
<p>Furthermore, John Dewey saw great possibilities opened by the war for the advent of worldwide collectivism. To Dewey, America's entrance into the war created a "plastic juncture" in the world, a world marked by a "world organization and the beginnings of a public control which crosses nationalistic boundaries and interests," and which would also "outlaw war."<a href="#note50" name="ref50" id="ref50">[50]</a></p>
<p>The editors of the <em>New Republic</em> took a position similar to Dewey's, except that they arrived at it even earlier. In his editorial in the magazine's first issue in November 1914, Herbert Croly cheerily prophesied that the war would stimulate America's spirit of nationalism and therefore bring it closer to democracy. At first hesitant about the collectivist war economies in Europe, the <em>New Republic</em> soon began to cheer and urged the United States to follow the lead of the warring European nations and socialize its economy and expand the powers of the State.</p>
<p>As America prepared to enter the war, the <em>New Republic</em>, examining war collectivism in Europe, rejoiced that "on its administrative side socialism [had] won a victory that [was] superb and compelling." True, European war collectivism was a bit grim and autocratic, but never fear, America could use the selfsame means for "democratic" goals.</p>
<p>The <em>New Republic</em> intellectuals also delighted in the "war spirit" in America, for that spirit meant "the substitution of national and social and organic forces for the more or less mechanical private forces operative in peace." The purposes of war and social reform might be a bit different, but, after all, "they are both purposes, and luckily for mankind a social organization which is efficient is as useful for the one as for the other."<a href="#note51" name="ref51" id="ref51">[51]</a> Lucky indeed.</p>
<p>As America prepared to enter the war, the <em>New Republic</em> eagerly looked forward to imminent collectivization, sure that it would bring "immense gains in national efficiency and happiness." After war was declared, the magazine urged that the war be used as "an aggressive tool of democracy."</p>
<p>"Why should not the war serve," the magazine asked, "as a pretext to be used to foist innovations upon the country?" In that way, progressive intellectuals could lead the way in abolishing "the typical evils of the sprawling half-educated competitive capitalism."</p>
<p>Convinced that the United States would attain socialism through war, Walter Lippmann, in a public address shortly after American entry, trumpeted his apocalyptic vision of the future:</p>
<blockquote><p>We who have gone to war to insure democracy in the world will have raised an aspiration here that will not end with the overthrow of the Prussian autocracy. We shall turn with fresh interests to our own tyrannies — to our Colorado mines, our autocratic steel industries, sweatshops, and our slums. A force is loose in America. Our own reactionaries will not assuage it. We shall know how to deal with them.<a href="#note52" name="ref52" id="ref52">[52]</a></p></blockquote>
<p>Walter Lippmann, indeed, had been the foremost hawk among the <em>New Republic</em> intellectuals. He had pushed Croly into backing Wilson and into supporting intervention, and then had collaborated with Colonel House in pushing Wilson into entering the war. Soon Lippmann, an enthusiast for conscription, had to confront the fact that he himself, only twenty-seven years old and in fine health, was eminently eligible for the draft. Somehow, however, Lippmann failed to unite theory and praxis.</p>
<p>Young Felix Frankfurter, progressive Harvard Law Professor and a close associate of the <em>New Republic</em> editorial staff, had just been selected as a special assistant to Secretary of War Baker. Lippmann somehow felt that his own inestimable services could be better used planning the postwar world than battling in the trenches. And so he wrote to Frankfurter asking for a job in Baker's office. "What I want to do," he pleaded, "is to devote all my time to studying and speculating on the approaches to peace and the reaction from the peace. Do you think you can get me an exemption on such highfalutin grounds?" He then rushed to reassure Frankfurter that there was nothing "personal" in this request. After all, he explained, "the things that need to be thought out, are so big that there must be no personal element mixed up with this." Frankfurter having paved the way, Lippmann wrote to Secretary Baker. He assured Baker that he was only applying for a job and draft exemption on the pleading of others and in stern submission to the national interest. As Lippmann put it in a remarkable demonstration of cant:</p>
<blockquote><p>I have consulted all the people whose advice I value and they urge me to apply for exemption. You can well understand that this is not a pleasant thing to do, and yet, after searching my soul as candidly as I know how, I am convinced that I can serve my bit much more effectively than as a private in the new armies.</p></blockquote>
<p>No doubt.</p>
<p>As icing on the cake, Lippmann added an important bit of "disinformation." For, he piteously wrote to Baker, the fact is "that my father is dying and my mother is absolutely alone in the world. She does not know what his condition is, and I cannot tell anyone for fear it would become known."</p>
<p>Apparently, no one else "knew" his father's condition either, including his father and the medical profession, for the elder Lippmann managed to peg along successfully for the next ten years.<a href="#note53" name="ref53" id="ref53">[53]</a></p>
<p>Secure in his draft exemption, Walter Lippmann hied off in high excitement to Washington, there to help run the war and, a few months later, to help direct Colonel House's secret conclave of historians and social scientists setting out to plan the shape of the future peace treaty and the postwar world. Let others fight and die in the trenches; Walter Lippmann had the satisfaction of knowing that his talents, at least, would be put to their best use by the newly emerging collectivist State.</p>
<p>As the war went on, Croly and the other editors, having lost Lippmann to the great world beyond, cheered every new development of the massively controlled war economy. The nationalization of railroads and shipping, the priorities and allocation system, the total domination of all parts of the food industry achieved by Herbert Hoover and the Food Administration, the pro-union policy, the high taxes, and the draft were all hailed by the <em>New Republic</em> as an expansion of democracy's power to plan for the general good. As the Armistice ushered in the postwar world, the <em>New Republic</em> looked back on the handiwork of the war and found it good: "We revolutionized our society." All that remained was to organize a new constitutional convention to complete the job of reconstructing America.<a href="#note54" name="ref54" id="ref54">[54]</a></p>
<p>But the revolution had not been fully completed. Despite the objections of Bernard Baruch and other wartime planners, the government decided not to make most of the war collectivist machinery permanent. From then on, the fondest ambition of Baruch and the others was to make the World War I system a permanent institution of American life. The most trenchant epitaph on the World War I polity was delivered by Rexford Guy Tugwell, the most frankly collectivist of the Brain Trusters of Franklin Roosevelt's New Deal. Looking back on "America's wartime socialism" in 1927, Tugwell lamented that if only the war had lasted longer, that great "experiment" could have been completed: "We were on the verge of having an international industrial machine when peace broke," Tugwell mourned. "Only the Armistice prevented a great experiment in control of production, control of prices, and control of consumption."<a href="#note55" name="ref55" id="ref55">[55]</a> Tugwell need not have been troubled; there would soon be other emergencies, other wars.</p>
<p>At the end of the war, Lippmann was to go on to become America's foremost journalistic pundit. Croly, having broken with the Wilson Administration on the harshness of the Versailles Treaty, was bereft to find the <em>New Republic</em> no longer the spokesman for some great political leader. During the late 1920s he was to discover an exemplary national collectivist leader abroad — in Benito Mussolini.<a href="#note56" name="ref56" id="ref56">[56]</a> That Croly ended his years as an admirer of Mussolini comes as no surprise when we realize that from early childhood he had been steeped by a doting father in the authoritarian socialist doctrines of Auguste Comte's Positivism. These views were to mark Croly throughout his life. Thus, Herbert's father, David, the founder of Positivism in the United States, advocated the establishment of vast powers of government over everyone's life. David Croly favored the growth of trusts and monopolies as a means both to that end and also to eliminate the evils of individual competition and "selfishness." Like his son, David Croly railed at the Jeffersonian "fear of government" in America, and looked to Hamilton as an example to counter that trend.<a href="#note57" name="ref57" id="ref57">[57]</a></p>
<p>And what of Professor Dewey, the doyen of the pacifist intellectuals — turned drumbeaters for war? In a little known period of his life, John Dewey spent the immediate postwar years, 1919–21, teaching at Peking University and traveling in the Far East. China was then in a period of turmoil over the clauses of the Versailles Treaty that transferred the rights of dominance in Shantung from Germany to Japan. Japan had been promised this reward by the British and French in secret treaties in return for entering the war against Germany.</p>
<p>The Wilson Administration was torn between the two camps. On the one hand were those who wished to stand by the Allies' decision and who envisioned using Japan as a club against Bolshevik Russia in Asia. On the other were those who had already begun to sound the alarm about a Japanese menace and who were committed to China, often because of connections with the American Protestant missionaries who wished to defend and expand their extraterritorial powers of governance in China. The Wilson Administration, which had originally taken a pro-Chinese stand, reversed itself in the spring of 1919 and endorsed the Versailles provisions.</p>
<p>Into this complex situation John Dewey plunged, seeing no complexity and of course considering it unthinkable for either him or the United States to stay out of the entire fray. Dewey leaped into total support of the Chinese nationalist position, hailing the aggressive Young China movement and even endorsing the pro-missionary YMCA in China as "social workers." Dewey thundered that while "I didn't expect to be a jingo," that Japan must be called to account and that Japan is the great menace in Asia. Thus, scarcely had Dewey ceased being a champion of one terrible world war than he began to pave the way for an even greater one.<a href="#note58" name="ref58" id="ref58">[58]</a></p>
<h4 id="6" name="6">VI. Economics in Service of the State: The Empiricism of Richard T. Ely</h4>
<p>World War I was the apotheosis of the growing notion of intellectuals as servants of the State and junior partners in State rule. In the new fusion of intellectuals and State, each was of powerful aid to the other. Intellectuals could serve the State by apologizing for and supplying rationales for its deeds. Intellectuals were also needed to staff important positions as planners and controllers of the society and economy. The State could also serve intellectuals by restricting entry into, and thereby raising the income and the prestige of, the various occupations and professions. During World War I, historians were of particular importance in supplying the government with war propaganda, convincing the public of the unique evil of Germans throughout history and of the satanic designs of the Kaiser. Economists, particularly empirical economists and statisticians, were of great importance in the planning and control of the nation's wartime economy. Historians playing preeminent roles in the war propaganda machine have been studied fairly extensively; economists and statisticians, playing a less blatant and allegedly "value-free" role, have received far less attention.<a href="#note59" name="ref59" id="ref59">[59]</a></p>
<p>Although it is an outworn generalization to say that nineteenth century economists were stalwart champions of laissez faire, it is still true that deductive economic theory proved to be a mighty bulwark against government intervention. For, basically, economic theory showed the harmony and order inherent in the free market, as well as the counterproductive distortions and economic shackles imposed by state intervention. In order for statism to dominate the economics profession, then, it was important to discredit deductive theory. One of the most important ways of doing so was to advance the notion that, to be "genuinely scientific," economics had to eschew generalization and deductive laws and simply engage in empirical inquiry into the facts of history and historical institutions, hoping that somehow laws would eventually arise from these detailed investigations.</p>
<p>Thus the German Historical School, which managed to seize control of the economics discipline in Germany, fiercely proclaimed not only its devotion to statism and government control, but also its opposition to the "abstract" deductive laws of political economy. This was the first major group within the economics profession to champion what Ludwig von Mises was later to call "anti-economics." Gustav Schmoller, the leader of the Historical School, proudly declared that his and his colleagues' major task at the University of Berlin was to form "the intellectual bodyguard of the House of Hohenzollern."</p>
<p>During the 1880s and 1890s bright young graduate students in history and the social sciences went to Germany, the home of the PhD degree, to obtain their doctorates. Almost to a man, they returned to the United States to teach in colleges and in the newly created graduate schools, imbued with the excitement of the "new" economics and political science. It was a "new" social science that lauded the German and Bismarckian development of a powerful welfare-warfare State, a State seemingly above all social classes, that fused the nation into an integrated and allegedly harmonious whole. The new society and polity was to be run by a powerful central government, cartelizing, dictating, arbitrating, and controlling, thereby eliminating competitive laissez-faire capitalism on the one hand and the threat of proletarian socialism on the other. And at or near the head of the new dispensation was to be the new breed of intellectuals, technocrats, and planners, directing, staffing, propagandizing, and "selflessly" promoting the common good while ruling and lording over the rest of society. In short, doing well by doing good. To the new breed of progressive and statist intellectuals in America, this was a heady vision indeed.</p>
<p>Richard T. Ely, virtually the founder of this new breed, was the leading progressive economist and also the teacher of most of the others. As an ardent postmillennialist pietist, Ely was convinced that he was serving God and Christ as well. Like so many pietists, Ely was born (in 1854) of solid Yankee and old Puritan stock, again in the midst of the fanatical Burned-Over District of western New York. Ely's father, Ezra, was an extreme Sabbatarian, preventing his family from playing games or reading books on Sunday, and so ardent a prohibitionist that, even though an impoverished, marginal farmer, he refused to grow barley, a crop uniquely suitable to his soil, because it would have been used to make that monstrously sinful product, beer.<a href="#note60" name="ref60" id="ref60">[60]</a> Having been graduated from Columbia College in 1876, Ely went to Germany and received his PhD from Heidelberg in 1879. In several decades of teaching at Johns Hopkins and then at Wisconsin, the energetic and empire-building Ely became enormously influential in American thought and politics. At Johns Hopkins he turned out a gallery of influential students and statist disciples in all fields of the social sciences as well as economics. These disciples were headed by the pro-union institutionalist economist John R. Commons, and included the social-control sociologists Edward Alsworth Ross and Albion W. Small; John H. Finlay, President of City College of New York; Dr. Albert Shaw, editor of the Review of Reviews and influential adviser and theoretician to Theodore Roosevelt; the municipal reformer Frederick C. Howe; and the historians Frederick Jackson Turner and J. Franklin Jameson. Newton D. Baker was trained by Ely at Hopkins, and Woodrow Wilson was also his student there, although there is no direct evidence of intellectual influence.</p>
<p>In the mid-1880s Richard Ely founded the American Economic Association in a conscious attempt to commit the economics profession to statism as against the older laissez-faire economists grouped in the Political Economy Club. Ely continued as secretary-treasurer of the AEA for seven years, until his reformer allies decided to weaken the association's commitment to statism in order to induce the laissez-faire economists to join the organization. At that point, Ely, in high dudgeon, left the AEA.</p>
<p>At Wisconsin in 1892, Ely formed a new School of Economics, Political Science, and History, surrounded himself with former students, and gave birth to the Wisconsin Idea which, with the help of John Commons, succeeded in passing a host of progressive measures for government regulation in Wisconsin. Ely and the others formed an unofficial but powerful brain trust for the progressive regime of Wisconsin Governor Robert M. La Follette, who got his start in Wisconsin politics as an advocate of prohibition. Though never a classroom student of Ely's, La Follette always referred to Ely as his teacher and as the molder of the Wisconsin Idea. And Theodore Roosevelt once declared that Ely "first introduced me to radicalism in economics and then made me sane in my radicalism."<a href="#note61" name="ref61" id="ref61">[61]</a></p>
<p>Ely was also one of the most prominent postmillennialist intellectuals of the era. He fervently believed that the State is God's chosen instrument for reforming and Christianizing the social order so that eventually Jesus would arrive and put an end to history. The State, declared Ely, "is religious in its essence," and, furthermore, "God works through the State in carrying out His purposes more universally than through any other institution." The task of the church is to guide the State and utilize it in these needed reforms.<a href="#note62" name="ref62" id="ref62">[62]</a></p>
<p>An inveterate activist and organizer, Ely was prominent in the evangelical Chautauqua movement, and he founded there the "Christian Sociology" summer school, which infused the influential Chautauqua operation with the concepts and the personnel of the Social Gospel movement. Ely was a friend and close associate of Social Gospel leaders Revs. Washington Gladden, Walter Rauschenbusch, and Josiah Strong. With Strong and Commons, Ely organized the Institute of Christian Sociology.<a href="#note63" name="ref63" id="ref63">[63]</a> Ely also founded and became the secretary of the Christian Social Union of the Episcopal Church, along with Christian Socialist W.D.P. Bliss. All of these activities were infused with postmillennial statism. Thus, the Institute of Christian Sociology was pledged to present God's "kingdom as the complete ideal of human society to be realized on earth." Moreover,</p>
<blockquote><p>Ely viewed the state as the greatest redemptive force in society. In Ely's eyes, government was the God-given instrument through which we had to work. Its preeminence as a divine instrument was based on the post-Reformation abolition of the division between the sacred and the secular and on the State's power to implement ethical solutions to public problems. The same identification of sacred and secular which took place among liberal clergy enabled Ely to both divinize the state and socialize Christianity: he thought of government as God's main instrument of redemption….<a href="#note64" name="ref64" id="ref64">[64]</a></p></blockquote>
<p>When war came, Richard Ely was for some reason (perhaps because he was in his sixties) left out of the excitement of war work and economic planning in Washington. He bitterly regretted that "I have not had a more active part then I have had in this greatest war in the world's history."<a href="#note65" name="ref65" id="ref65">[65]</a> But Ely made up for his lack as best he could; virtually from the start of the European war, he whooped it up for militarism, war, the "discipline" of conscription, and the suppression of dissent and "disloyalty" at home. A lifelong militarist, Ely had tried to volunteer for war service in the Spanish-American War, had called for the suppression of the Philippine insurrection, and was particularly eager for conscription and for forced labor for "loafers" during World War I. By 1915 Ely was agitating for immediate compulsory military service, and the following year he joined the ardently pro-war and heavily big business–influenced National Security League, where he called for the liberation of the German people from "autocracy."<a href="#note66" name="ref66" id="ref66">[66</a></p>
<p>In advocating conscription, Ely was neatly able to combine moral, economic, and prohibitionist arguments for the draft: "The moral effect of taking boys off street corners and out of saloons and drilling them is excellent, and the economic effects are likewise beneficial."<a href="#note67" name="ref67" id="ref67">[67]</a> Indeed, conscription for Ely served almost as a panacea for all ills. So enthusiastic was he about the World War I experience that Ely again prescribed his favorite cure-all to alleviate the 1929 depression. He proposed a permanent peacetime "industrial army" engaged in public works and manned by conscripting youth for strenuous physical labor. This conscription would instill into America's youth the essential "military ideals of hardihood and discipline," a discipline once provided by life on the farm but unavailable to the bulk of the populace now growing up in the effete cities. This small, standing conscript army could then speedily absorb the unemployed during depressions. Under the command of "an economic general staff," the industrial army would "go to work to relieve distress with all the vigor and resources of brain and brawn that we employed in the World War."<a href="#note68" name="ref68" id="ref68">[68]</a></p>
<p>Deprived of a position in Washington, Ely made the stamping out of "disloyalty" at home his major contribution to the war effort. He called for the total suspension of academic freedom for the duration. Any professor, he declared, who stated "opinions which hinder us in this awful struggle" should be "fired" if not indeed "shot." The particular focus of Ely's formidable energy was a zealous campaign to try to get his old ally in Wisconsin politics, Robert M. La Follette, expelled from the US Senate for continuing to oppose America's participation in the war. Ely declared that his "blood boils" at La Follette's "treason" and attacks on war profiteering. Throwing himself into the battle, Ely founded and became president of the Madison chapter of the Wisconsin Loyalty Legion and mounted a campaign to expel La Follette.<a href="#note69" name="ref69" id="ref69">[69]</a> The campaign was meant to mobilize the Wisconsin faculty and to support the ultrapatriotic and ultrahawkish activities of Theodore Roosevelt. Ely wrote to TR that "we must crush La Follettism." In his unremitting campaign against the Wisconsin Senator, Ely thundered that La Follette "has been of more help to the Kaiser than a quarter of a million troops."<a href="#note70" name="ref70" id="ref70">[70]</a> "Empiricism" rampant.</p>
<p>The faculty of the University of Wisconsin was stung by charges throughout the state and the country that its failure to denounce La Follette was proof that the university — long affiliated with La Follette in state politics — supported his disloyal antiwar policies. Prodded by Ely, Commons, and others, the university's War Committee drew up and circulated a petition, signed by the university president, all the deans, and over 90 percent of the faculty, that provided one of the more striking examples in United States history of academic truckling to the State apparatus. None too subtly using the constitutional verbiage for treason, the petition protested "against those utterances and actions of Senator La Follette which have given aid and comfort to Germany and her allies in the present war; we deplore his failure loyally to support the government in the prosecution of the war."<a href="#note70" name="ref70" id="ref70">[70]</a></p>
<p>Behind the scenes, Ely tried his best to mobilize America's historians against La Follette, to demonstrate that he had given aid and comfort to the enemy. Ely was able to enlist the services of the National Board of Historical Service, the propaganda agency established by professional historians for the duration of the war, and of the government's own propaganda arm, the Committee on Public Information. Warning that the effort must remain secret, Ely mobilized historians under the aegis of these organizations to research German and Austrian newspapers and journals to try to build a record of La Follette's alleged influence, "indicating the encouragement he has given Germany." The historian E. Merton Coulter revealed the objective spirit animating these researches: "I understand it is to be an unbiased and candid account of the Senator's [La Follette's] course and its effect — but we all know it can lead but to one conclusion — something little short of treason."<a href="#note71" name="ref71" id="ref71">[71]</a></p>
<p><img alt="" src="http://images.mises.org/ww1pp1hat.jpg" hspace="15" align="right" /></p>
<p>Professor Gruber well notes that this campaign to get La Follette was "a remarkable example of the uses of scholarship for espionage. It was a far cry from the disinterested search for truth for a group of professors to mobilize a secret research campaign to find ammunition to destroy the political career of a United States senator who did not share their view of the war."<a href="#note72" name="ref72" id="ref72">[72]</a> In any event, no evidence was turned up, the movement failed, and the Wisconsin professoriat began to move away in distrust from the Loyalty Legion.<a href="#note73" name="ref73" id="ref73">[73]</a></p>
<p>After the menace of the Kaiser had been extirpated, the Armistice found Professor Ely, along with his compatriots in the National Security League, ready to segue into the next round of patriotic repression. During Ely's anti–La Follette research campaign he had urged investigation of "the kind of influence which he [La Follette] has exerted against our country in Russia." Ely pointed out that modem "democracy" requires a "high degree of conformity" and that therefore the "most serious menace" of Bolshevism, which Ely depicted as "social disease germs," must be fought "with repressive measures."</p>
<p>By 1924, however, Richard T. Ely's career of repression was over, and what is more, in a rare instance of the workings of poetic justice, he was hoisted with his own petard. In 1922 the much-traduced Robert La Follette was reelected to the Senate and also swept the Progressives back into power in the state of Wisconsin. By 1924 the Progressives had gained control of the Board of Regents, and they moved to cut off the water of their former academic ally and empire-builder. Ely then felt it prudent to move out of Wisconsin together with his Institute, and while he lingered for some years at Northwestern, the heyday of Ely's fame and fortune was over.</p>
<h4 id="7" name="7">VII. Economics in Service of the State: Government and Statistics</h4>
<p>Statistics is a vital, though much underplayed, requisite of modern government. Government could not even presume to control, regulate, or plan any portion of the economy without the service of its statistical bureaus and agencies. Deprive government of its statistics and it would be a blind and helpless giant, with no idea whatever of what to do or where to do it.</p>
<p>It might be replied that business firms, too, need statistics in order to function. But business needs for statistics are far less in quantity and also different in quality. Business may need statistics in its own micro area of the economy, but only on its prices and costs; it has little need for broad collections of data or for sweeping, holistic aggregates. Business could perhaps rely on its own privately collected and unshared data. Furthermore, much entrepreneurial knowledge is qualitative, not enshrined in quantitative data, and of a particular time, area, and location. But government bureaucracy could do nothing if forced to be confined to qualitative data. Deprived of profit and loss tests for efficiency, or of the need to serve consumers efficiently, conscripting both capital and operating costs from taxpayers, and forced to abide by fixed, bureaucratic rules, modern government shorn of masses of statistics could do virtually nothing.<a href="#note74" name="ref74" id="ref74">[74]</a></p>
<p>Hence the enormous importance of World War I, not only in providing the power and the precedent for a collectivized economy, but also in greatly accelerating the advent of statisticians and statistical agencies of government, many of which (and who) remained in government, ready for the next leap forward of power.</p>
<p>Richard T. Ely, of course, championed the new empirical "look and see" approach, with the aim of fact-gathering to "mold the forces at work in society and to improve existing conditions."<a href="#note75" name="ref75" id="ref75">[75]</a> More importantly, one of the leading authorities on the growth of government expenditure has linked it with statistics and empirical data: "Advance in economic science and statistics strengthened belief in the possibilities of dealing with social problems by collective action. It made for increase in the statistical and other fact-finding activities of government."<a href="#note76" name="ref76" id="ref76">[76]</a> As early as 1863, Samuel B. Ruggles, American delegate to the International Statistical Congress in Berlin, proclaimed that "statistics are the very eyes of the statesman, enabling him to survey and scan with clear and comprehensive vision the whole structure and economy of the body politic."<a href="#note77" name="ref77" id="ref77">[77]</a></p>
<p>Conversely, this means that stripped of these means of vision, the statesman would no longer be able to meddle, control and plan.</p>
<p>Moreover, government statistics are clearly needed for specific types of intervention. Government could not intervene to alleviate unemployment unless statistics of unemployment were collected — and so the impetus for such collection. Carroll D. Wright, one of the first Commissioners of Labor in the United States, was greatly influenced by the famous statistician and German Historical School member, Ernst Engel, head of the Royal Statistical Bureau of Prussia. Wright sought the collection of unemployment statistics for that reason, and in general, for "the amelioration of unfortunate industrial and social relations." Henry Carter Adams, a former student of Engel's, and, like Ely, a statist and progressive "new economist," established the Statistical Bureau of the Interstate Commerce Commission, believing that "ever increasing statistical activity by the government was essential — for the sake of controlling naturally monopolistic industries." And Professor Irving Fisher of Yale, eager for government to stabilize the price level, conceded that he wrote <em>The Making of Index Numbers</em> to solve the problem of the unreliability of index numbers. "Until this difficulty could be met, stabilization could scarcely be expected to become a reality."</p>
<p>Carroll Wright was a Bostonian and a progressive reformer. Henry Carter Adams, the son of a New England pietist Congregationalist preacher on missionary duty in Iowa, studied for the ministry at his father's alma mater, Andover Theological Seminary, but soon abandoned this path. Adams devised the accounting system of the Statistical Bureau of the ICC. This system "served as a model for the regulation of public utilities here and throughout the world."<a href="#note78" name="ref78" id="ref78">[78]</a></p>
<p>Irving Fisher was the son of a Rhode Island Congregationalist pietist preacher, and his parents were both of old Yankee stock, his mother a strict Sabbatarian. As befitted what his son and biographer called his "crusading spirit," Fisher was an inveterate reformer, urging the imposition of numerous progressive measures including Esperanto, simplified spelling, and calendar reform. He was particularly enthusiastic about purging the world of "such iniquities of civilization as alcohol, tea, coffee, tobacco, refined sugar, and bleached white flour."<a href="#note79" name="ref79" id="ref79">[79]</a></p>
<p>During the 1920s Fisher was the leading prophet of that so-called New Era in economics and in society. He wrote three books during the 1920s praising the noble experiment of prohibition, and he lauded Governor Benjamin Strong and the Federal Reserve System for following his advice and expanding money and credit so as to keep the wholesale price level virtually constant. Because of the Fed's success in imposing Fisherine price stabilization, Fisher was so sure that there could be no depression that as late as 1930 he wrote a book claiming that there was and could be no stock crash and that stock prices would quickly rebound. Throughout the 1920s Fisher insisted that since wholesale prices remained constant, there was nothing amiss about the wild boom in stocks. Meanwhile he put his theories into practice by heavily investing his heiress wife's considerable fortune in the stock market. After the crash he frittered away his sister-in-law's money when his wife's fortune was depleted, at the same time calling frantically on the federal government to inflate money and credit and to re-inflate stock prices to their 1929 levels. Despite his dissipation of two family fortunes, Fisher managed to blame almost everyone except himself for the debacle.<a href="#note80" name="ref80" id="ref80">[80]</a></p>
<p>As we shall see, in view of the importance of Wesley Clair Mitchell in the burgeoning of government statistics in World War I, Mitchell's view on statistics are of particular importance.<a href="#note81" name="ref81" id="ref81">[81]</a> Mitchell, an institutionalist and student of Thorstein Veblen, was one of the prime founders of modern statistical inquiry in economics and clearly aspired to lay the basis for "scientific" government planning. As Professor Dorfman, friend and student of Mitchell's, put it:</p>
<blockquote><p>"clearly the type of social invention most needed today is one that offers definite techniques through which the social system can be controlled and operated to the optimum advantage of its members." (Quote from Mitchell.) To this end he constantly sought to extend, improve and refine the gathering and compilation of data…. Mitchell believed that business-cycle analysis …might indicate the means to the achievement of orderly social control of business activity.<a href="#note82" name="ref82" id="ref82">[82]</a></p></blockquote>
<p>Or, as Mitchell's wife and collaborator stated in her memoirs:</p>
<blockquote><p>he [Mitchell] envisioned the great contribution that government could make to the understanding of economic and social problems if the statistical data gathered independently by various Federal agencies were systematized and planned so that the interrelationships among them could be studied. The idea of developing social statistics, <em>not merely as a record but as a basis for planning</em>, emerged early in his own work.<a href="#note83" name="ref83" id="ref83">[83]</a></p></blockquote>
<p>Particularly important in the expansion of statistics in World War I was the growing insistence, by progressive intellectuals and corporate liberal businessmen alike, that democratic decision-making must be increasingly replaced by the administrative and technocratic. Democratic or legislative decisions were messy, "inefficient," and might lead to a significant curbing of statism, as had happened in the heyday of the Democratic party during the nineteenth century. But if decisions were largely administrative and technocratic, the burgeoning of state power could continue unchecked. The collapse of the laissez-faire creed of the Democrats in 1896 left a power vacuum in government that administrative and corporatist types were eager to fill.</p>
<p>Increasingly, then, such powerful corporatist big business groups as the National Civic Federation disseminated the idea that governmental decisions should be in the hands of the efficient technician, the allegedly value-free expert. In short, government, in virtually all of its aspects, should be "taken out of politics." And statistical research with its aura of empiricism, quantitative precision, and nonpolitical value-freedom, was in the forefront of such emphasis. In the municipalities, an increasingly powerful progressive reform movement shifted decisions from elections in neighborhood wards to citywide professional managers and school superintendents. As a corollary, political power was increasingly shifted from working class and ethnic German Lutheran and Catholic wards to upper-class pietist business groups.<a href="#note84" name="ref84" id="ref84">[84]</a></p>
<p>By the time World War I arrived in Europe, a coalition of progressive intellectuals and corporatist businessmen was ready to go national in sponsoring allegedly objective statistical research institutes and think tanks. Their views have been aptly summed up by David Eakins:</p>
<blockquote><p>The conclusion being drawn by these people by 1915 was that fact-finding and policymaking had to be isolated from class struggle and freed from political pressure groups. The reforms that would lead to industrial peace and social order, these experts were coming to believe, could only be derived from data determined by objective fact-finders (such as themselves) and under the auspices of sober and respectable organizations (such as only they could construct). The capitalist system could be improved only by a single-minded reliance upon experts detached from the hurly-burly of democratic policy-making. The emphasis was upon efficiency — and democratic policymaking was inefficient. An approach to the making of national economic and social policy outside traditional democratic political processes was thus emerging before the United States formally entered World War I.<a href="#note85" name="ref85" id="ref85">[85]</a></p></blockquote>
<p>Several corporatist businessmen and intellectuals moved at about the same time toward founding such statistical research institutes. In 1906–07, Jerome D. Greene, secretary of the Harvard University Corporation, helped found an elite Tuesday Evening Club at Harvard to explore important issues in economics and the social sciences. In 1910 Greene rose to an even more powerful post as general manager of the new Rockefeller Institute for Medical Research, and three years later Greene became secretary and CEO of the powerful philanthropic organization, the Rockefeller Foundation. Greene immediately began to move toward establishing a Rockefeller-funded institute for economic research, and in March 1914 he called an exploratory group together in New York, chaired by his friend and mentor in economics, the first Dean of the Harvard Graduate School of Business, Edwin F. Gay. The developing idea was that Gay would become head of a new, "scientific" and "impartial" organization, The Institute of Economic Research, which would gather statistical facts, and that Wesley Mitchell would be its director.<a href="#note86" name="ref86" id="ref86">[86]</a></p>
<p>Opposing advisers to John D. Rockefeller, Jr., won out over Greene, however, and the institute plan was scuttled.<a href="#note87" name="ref87" id="ref87">[87]</a> Mitchell and Gay pressed on, with the lead now taken by Mitchell's longtime friend, chief statistician and vice president of AT&T, Malcolm C. Rorty. Rorty lined up support for the idea from a number of progressive statisticians and businessmen, including Chicago publisher of business books and magazines, Arch W. Shaw; E.H. Goodwin of the US Chamber of Commerce; Magnus Alexander, statistician and assistant to the president of General Electric, like AT&T, a Morgan-oriented concern; John R. Commons, economist and aide-de-camp to Richard T. Ely at Wisconsin; and Nahum I. Stone, statistician, former Marxist, a leader in the "scientific management" movement, and labor manager for the Hickey Freeman clothing company. This group was in the process of forming a "Committee on National Income" when the United States entered the war, and they were forced to shelve their plans temporarily.<a href="#note88" name="ref88" id="ref88">[88]</a> After the war, however, the group set up the National Bureau of Economic Research, in 1920.<a href="#note89" name="ref89" id="ref89">[89]</a></p>
<p>While the National Bureau was not to take final shape until after the war, another organization, created on similar lines, successfully won Greene's and Rockefeller's support. In 1916 they were persuaded by Raymond B. Fosdick to found the Institute for Government Research (IGR).<a href="#note90" name="ref90" id="ref90">[90]</a> The IGR was slightly different in focus from the National Bureau group, as it grew directly out of municipal progressive reform and the political science profession. One of the important devices used by the municipal reformers was the private bureau of municipal research, which tried to seize decision-making from allegedly "corrupt" democratic bodies on behalf of efficient, nonpartisan organizations headed by progressive technocrats and social scientists.</p>
<p>In 1910 President William Howard Taft, intrigued with the potential for centralizing power in a chief executive inherent in the idea of the executive budget, appointed the "father of the budget idea," the political scientist Frederick D. Cleveland, as head of a Commission on Economy and Efficiency. Cleveland was the director of the New York Bureau of Municipal Research. The Cleveland Commission also included political scientist and municipal reformer Frank Goodnow, professor of public law at Columbia University, first president of the American Political Science Association and president of Johns Hopkins; and William Franklin Willoughby, former student of Ely, Assistant Director of the Bureau of Census, and later President of the American Association for Labor Legislation.<a href="#note91" name="ref91" id="ref91">[91]</a> The Cleveland Commission was delighted to tell President Taft precisely what he wanted to hear. The Commission recommended sweeping administrative changes that would provide a Bureau of Central Administrative Control to form a "consolidated information and statistical arm of the entire national government." And at the heart of the new Bureau would be the Budget Division, which was to develop, at the behest of the president, and then present "an annual program of business for the Federal Government to be financed by Congress."<a href="#note92" name="ref92" id="ref92">[92]</a></p>
<p>When Congress balked at the Cleveland Commission's recommendations, the disgruntled technocrats decided to establish an Institute for Government Research in Washington to battle for these and similar reforms. With funding secured from the Rockefeller Foundation, the IGR was chaired by Goodnow, with Willoughby as its director.<a href="#note93" name="ref93" id="ref93">[93]</a> Scan Robert S. Brookings assumed responsibility for the financing.</p>
<p>When America entered the war, present and future NBER and IGR leaders were all over Washington, key figures and statisticians in the collectivized war economy.</p>
<p>By far the most powerful of the growing number of economists and statisticians involved in World War I was Edwin F. Gay. Arch W. Shaw, an enthusiast for rigid wartime planning of economic resources, was made head of the new Commercial Economy Board by the Council for National Defense as soon as America entered the war.<a href="#note94" name="ref94" id="ref94">[94]</a> Shaw, who had taught at and served on the administrative board of Harvard Business School, staffed the board with Harvard Business people; the secretary was Harvard economist Melvin T. Copeland, and other members included Dean Gay.</p>
<p>The board, which later became the powerful Conservation Division of the War Industries Board, focused on restricting competition in industry by eliminating the number and variety of products and by imposing compulsory uniformity, all in the name of "conservation" of resources to aid the war effort. For example, garment firms had complained loudly of severe competition because of the number and variety of styles, and so Gay urged the garment firms to form a trade association to work with the government in curbing the surfeit of competition. Gay also tried to organize the bakers so that they would not follow the usual custom of taking back stale and unsold bread from retail outlets. By the end of 1917, Gay was tired of using voluntary persuasion and was urging the government to use compulsory measures.</p>
<p>Gay's major power came in early 1918 when the Shipping Board, which had officially nationalized all ocean shipping, determined to restrict drastically the use of ships for civilian trade and to use the bulk of shipping for transport of American troops to France. Appointed in early January 1918 as merely a "special expert" by the Shipping Board, Gay in a brief time became the key figure in redirecting shipping from civilian to military use. Soon Edwin Gay had become a member of the War Trade Board and head of its statistical department, which issued restrictive licenses for permitted imports; head of the statistical department of the Shipping Board; representative of the Shipping Board on the War Trade Board; head of the statistical committee of the Department of Labor; head of the Division of Planning and Statistics of the War Industries Board (WIB); and, above all, head of the new Central Bureau of Planning and Statistics. The Central Bureau was organized in the fall of 1918, when President Wilson asked WIB chairman Bernard Baruch to produce a monthly survey of all the government's war activities. This "conspectus" evolved into the Central Bureau, responsible directly to the president. The importance of the bureau is noted by a recent historian:</p>
<blockquote><p>The new Bureau represented the "peak" statistical division of the mobilization, becoming its "seer and prophet" for the duration, coordinating over a thousand employees engaged in research and, as the agency responsible for giving the president a concise picture of the entire economy, becoming the closest approximation to a "central statistical commission." During the latter stages of the war it set up a clearinghouse of statistical work, organized liaisons with the statistical staff of all the war boards, and centralized the data production process for the entire war bureaucracy. By the war's end, Wesley Mitchell recalled, "we were in a fair way to develop for the first time a systematic organization of federal statistics."<a href="#note95" name="ref95" id="ref95">[95]</a></p></blockquote>
<p>Within a year, Edwin Gay had risen from a special expert to the unquestioned czar of a giant network of federal statistical agencies, with over a thousand researchers and statisticians working under his direct control. It is no wonder then that Gay, instead of being enthusiastic about the American victory he had worked so hard to secure, saw the Armistice as "almost a personal blow" that plunged him "into the slough of despond." All of his empire of statistics and control had just been coming together and developing into a mighty machine when suddenly "came that wretched Armistice."<a href="#note96" name="ref96" id="ref96">[96]</a> Truly a tragedy of peace.</p>
<p> </p>
<p>Gay tried valiantly to keep the war machinery going, continually complaining because many of his aides were leaving and bitterly denouncing the "hungry pack" who, for some odd reason, were clamoring for an immediate end to all wartime controls, including those closest to his heart, foreign trade and shipping. But one by one, despite the best efforts of Baruch and many of the wartime planners, the WIB and other war agencies disappeared.<a href="#note97" name="ref97" id="ref97">[97]</a> For a while, Gay pinned his hopes on his Central Bureau of Planning and Statistics (CBPS), which, in a fierce bout of bureaucratic infighting, he attempted to make the key economic and statistical group advising the American negotiators at the Versailles peace conference, thereby displacing the team of historians and social scientists assembled by Colonel House in the Inquiry. Despite an official victory, and an eight volume report of the CBPS delivered to Versailles by the head of CBPS European team, John Foster Dulles of the War Trade Board, the bureau had little influence over the final treaty.<a href="#note98" name="ref98" id="ref98">[98]</a></p>
<p>Peace having finally and irrevocably arrived, Edwin Gay, backed by Mitchell, tried his best to have the CBPS kept as a permanent, peacetime organization. Gay argued that the agency, with himself of course remaining as its head, could provide continuing data to the League of Nations, and above all could serve as the president's own eyes and ears and mold the sort of executive budget envisioned by the old Taft Commission. CBPS staff member and Harvard economist Edmund E. Day contributed a memorandum outlining specific tasks for the bureau to aid in demobilization and reconstruction, as well as rationale for the bureau becoming a permanent part of government. One thing it could do was to make a "continuing canvass" of business conditions in the United States. As Gay put it to President Wilson, using a favorite organicist analogy, a permanent board would serve "as a nervous system to the vast and complex organization of the government, furnishing to the controlling brain [the president] the information necessary for directing the efficient operation of the various members."<a href="#note99" name="ref99" id="ref99">[99]</a> Although the President was "very cordial" to Gay's plan, Congress refused to agree, and on June 30, 1919 the Central Bureau of Planning and Statistics was finally terminated, along with the War Trade Board. Edwin Gay would now have to seek employment in, if not the private, at least the quasi-independent, sector.</p>
<p>But Gay and Mitchell were not to be denied. Nor would the Brookings-Willoughby group. Their objective would be met more gradually and by slightly different means. Gay became editor of the <em>New York Evening Post</em> under the aegis of its new owner and Gay's friend, J.P. Morgan partner Thomas W. Lamont. Gay also helped to form and become first president of the National Bureau of Economic Research in 1920, with Wesley C. Mitchell as research director. The Institute for Government Research achieved its major objective, establishing a Budget Bureau in the Treasury Department in 1921, with the director of the IGR, William F. Willoughby, helping to draft the bill that established the bureau.<a href="#note100" name="ref100" id="ref100">[100]</a> The IGR people soon expanded their role to include economics, establishing an Institute of Economics headed by Robert Brookings and Arthur T. Hadley of Yale, with economist Harold G. Moulton as director.<a href="#note101" name="ref101" id="ref101">[101]</a> The institute, funded by the Carnegie Corporation, would be later merged, along with the IGR, into the Brookings Institution. Edwin Gay also moved into the foreign policy field by becoming secretary-treasurer and head of the Research Committee of the new and extremely influential organization, the Council on Foreign Relations (CFR).<a href="#note102" name="ref102" id="ref102">[102]</a></p>
<p>And finally, in the field of government statistics, Gay and Mitchell found a more gradual but longer-range route to power via collaboration with Herbert Hoover, soon to be Secretary of Commerce. No sooner had Hoover assumed the post in early 1921 when he expanded the Advisory Committee on the Census to include Gay, Mitchell, and other economists and then launched the monthly Survey of Current Business. The Survey was designed to supplement the informational activities of cooperating trade associations and, by supplying business information, aid these associations in Hoover's aim of cartelizing their respective industries.</p>
<p>Secrecy in business operations is a crucial weapon of competition, and conversely, publicity and sharing of information is an important tool of cartels in policing their members. The Survey of Current Business made available the current production, sales, and inventory data supplied by cooperating industries and technical journals. Hoover also hoped that by building on these services, eventually "the statistical program could provide the knowledge and foresight necessary to combat panic or speculative conditions, prevent the development of diseased industries, and guide decision-making so as to iron out rather than accentuate the business cycle."<a href="#note103" name="ref103" id="ref103">[l03]</a></p>
<p>In promoting his cartelization doctrine, Hoover met resistance both from some businessmen who resisted prying questionnaires and sharing competitive secrets and from the Justice Department. But, a formidable empire-builder, Herbert Hoover managed to grab statistical services from the Treasury Department and to establish a "waste elimination division" to organize businesses and trade associations to continue and expand the wartime "conservation" program of compulsory uniformity and restriction of the number and variety of competitive products. As assistant secretary to head up this program, Hoover secured engineer and publicist Frederick Feiker, an associate of Arch Shaw's business publication empire. Hoover also found a top assistant and lifelong disciple in Brigadier General Julius Klein, a protégé of Edwin Gay's, who had headed the Latin American division of the Bureau of Foreign and Domestic Commerce. As the new head of the bureau, Klein organized seventeen new export commodity divisions — reminiscent of commodity sections during wartime collectivism — each with "experts" drawn from the respective industries and each organizing regular cooperation with parallel industrial advisory committees. And through it all Herbert Hoover made a series of well-publicized speeches during 1921, spelling out how a well-designed government trade program, as well as a program in the domestic economy, could act both as a stimulant to recovery and as a permanent "stabilizer," while avoiding such unfortunate measures as abolishing tariffs or cutting wage rates. The best weapon, both in foreign and domestic trade, was to "eliminate waste" by a "cooperative mobilization" of government and industry.<a href="#note104" name="ref104" id="ref104">[104]</a></p>
<p>A month after the Armistice, the American Economic Association and the American Statistical Association met jointly in Richmond, Virginia. The presidential addresses were delivered by men in the forefront of the exciting new world of government planning, aided by social science, that seemed to loom ahead. In his address to the American Statistical Association, Wesley Clair Mitchell proclaimed that the war had "led to the use of statistics, not only as a record of what had happened, but also as a vital factor in planning what should be done." As he had said in his final lecture in Columbia University the previous spring, the war had shown that when the community desires to attain a great goal "then within a short period far-reaching social changes can be achieved."</p>
<p>"The peace will bring new problems, he opined, but "it seems impossible" that the various countries will "attempt to solve them without utilizing the same sort of centralized directing now employed to kill their enemies abroad for the new purpose of reconstructing their own life at home."</p>
<p>But the careful empiricist and statistician also provided a caveat. Broad social planning requires "a precise comprehension of social processes" and that can be provided only by the patient research of social science. As he had written to his wife eight years earlier, Mitchell stressed that what is needed for government intervention and planning is the application of the methods of physical science and industry, particularly precise quantitative research and measurement. In contrast to the quantitative physical sciences, Mitchell told the assembled statisticians, the social sciences are "immature, speculative, filled with controversy" and class struggle. But quantitative knowledge could replace such struggle and conflict by commonly accepted precise knowledge, "objective" knowledge "amenable to mathematical formulation" and "capable of forecasting group phenomena." A statistician, Mitchell opined, is "either right or wrong," and it is easy to demonstrate which. As a result of precise knowledge of facts, Mitchell envisioned, we can achieve "intelligent experimenting and detailed planning rather than agitation and class struggle."</p>
<p>To achieve these vital goals none other than economists and statisticians would provide the crucial element, for we would have to be "relying more and more on trained people to plan changes for us, to follow them up, to suggest alterations."<a href="#note105" name="ref105" id="ref105">[105]</a></p>
<p>In a similar vein, the assembled economists in 1918 were regaled with the visionary presidential address of Yale economist Irving Fisher. Fisher looked forward to an economic "world reconstruction" that would provide glorious opportunities for economists to satisfy their constructive impulses. A class struggle, Fisher noted, would surely be continuing over distribution of the nation's wealth. But by devising a mechanism of "readjustment," the nation's economists could occupy an enviable role as the independent and impartial arbiters of the class struggle, these disinterested social scientists making the crucial decisions for the public good.</p>
<p>In short, both Mitchell and Fisher were, subtly and perhaps half-consciously, advancing the case for a postwar world in which their own allegedly impartial and scientific professions could levitate above the narrow struggles of classes for the social product, and thus emerge as a commonly accepted, "objective" new ruling class, a twentieth-century version of the philosopher-kings.</p>
<p>It might not be amiss to see how these social scientists, prominent in their own fields and spokesmen in different ways for the New Era of the 1920s, fared in their disquisitions and guidance for the society and the economy. Irving Fisher, as we have seen, wrote several works celebrating the alleged success of prohibition, and insisted even after 1929, that since the price level had been kept stable, there could be no depression or stock market crash. For his part, Mitchell culminated a decade of snug alliance with Herbert Hoover by directing, along with Gay and the National Bureau, a massive and hastily written work on the American economy. Published in 1929 on the accession of Hoover to the presidency, with all the resources of scientific and quantitative economics and statistics brought to bear, there is not so much as a hint in <em>Recent Economic Changes in the United States</em> that there might be a crash and depression in the offing.</p>
<p>The <em>Recent Economic Changes</em> study was originated and organized by Herbert Hoover, and it was Hoover who secured the financing from the Carnegie Corporation. The object was to celebrate the years of prosperity presumably produced by Secretary of Commerce Hoover's corporatist planning and to find out how the possibly future President Hoover could maintain that prosperity by absorbing its lessons and making them a permanent part of the American political structure. The volume duly declared that to maintain the current prosperity, economists, statisticians, engineers, and enlightened managers would have to work out "a technique of balance" to be installed in the economy.</p>
<p><em>Recent Economic Changes</em>, that monument to "scientific" and political folly, went through three quick printings and was widely publicized and warmly received on all sides.<a href="#note106" name="ref106" id="ref106">[106]</a> Edward Eyre Hunt, Hoover's long-time aide in organizing his planning activities, was so enthusiastic that he continued celebrating the book and its paean to American prosperity throughout 1929 and 1930.<a href="#note107" name="ref107" id="ref107">[107]</a></p>
<p>It is appropriate to end our section on government and statistics by noting an unsophisticated yet perceptive cry from the heart. In 1945 the Bureau of Labor Statistics approached Congress for yet another in a long line of increases in appropriations for government statistics. In the process of questioning Dr. A. Ford Hinrichs, head of the BLS, Representative Frank B. Keefe, a conservative Republican Congressman from Oshkosh, Wisconsin, put an eternal question that has not yet been fully and satisfactorily answered:</p>
<blockquote><p>There is no doubt but what it would be nice to have a whole lot of statistics. I am just wondering whether we are not embarking on a program that is dangerous when we keep adding and adding and adding to this thing.</p>
<p>We have been planning and getting statistics ever since 1932 to try to meet a situation that was domestic in character, but were never able to even meet that question. Now we are involved in an international question. It looks to me as though we spend a tremendous amount of time with graphs and charts and statistics and planning. What my people are interested in is what is it all about? Where are we going, and where are you going?<a href="#note108" name="ref108" id="ref108">[108]</a></p></blockquote>
<hr width="33%" align="left" /><h4 id="notes" name="notes">Notes</h4>
<p><a href="#ref1" name="note1" id="note1">[1]</a> The title of this paper is borrowed from the pioneering last chapter of James Weinstein's excellent work, <em>The Corporate Ideal in the Liberal State</em>, 1900–1918 (Boston: Beacon Press, 1968). The last chapter is entitled, "War as Fulfillment."</p>
<p><a href="#ref2" name="note2" id="note2">[2]</a> Robert Higgs, <em>Crisis And Leviathan</em> (New York: Oxford University Press, 1987), pp. 123–158. For my own account of the collectivized war economy of World War I, see Murray N. Rothbard, "War Collectivism in World War I," in R. Radosh and M. Rothbard. eds., <em>A New History of Leviathan: Essays on the Rise of the American Corporate State</em> (New York: Dutton. 1972), pp. 66–110.</p>
<p><a href="#ref3" name="note3" id="note3">[3]</a> F.A. Hayek, "The Intellectuals and Socialism," in <em>Studies in Philosophy, Politics and Economics</em> (Chicago: University of Chicago Press, 1967), pp. 178ff.</p>
<p><a href="#ref4" name="note4" id="note4">[4]</a> On the conscription movement, see in particular Michael Pearlman, <em>To Make Democracy Safe for America: Patricians and Preparedness in the Progressive Era</em> (Urbana: University of Illinois Press, 1984). See also John W. Chambers II, "Conscripting for Colossus: The Adoption of the Draft in the United States in World War I," PhD diss., Columbia University. 1973; John Patrick Finnegan, <em>Against the Specter of a Dragon: the Campaign for American Military Preparedness</em>, 1914–1917 (Westport, Conn. Greenwood Press, 1974); and John Gany Clifford, <em>The Citizen Soldiers: The Plattsburg Training Camp Movement</em> (Lexington: University Press of Kentucky, 1972).</p>
<p><a href="#ref5" name="note5" id="note5">[5]</a> On ministers and the war, see Ray H. Abrams, <em>Preachers Present Arms</em> (New York: Round Table Press, 1933). On the mobilization of science, see David F. Noble, <em>America By Design: Science, Technology and the Rise of Corporate Capitalism</em> (New York: Oxford University Press, 1977), and Ronald C. Tobey, <em>The American Ideology of National Science, 1919–1930</em> (Pittsburgh: University of Pittsburgh Press, 1971).</p>
<p><a href="#ref6" name="note6" id="note6">[6]</a> Cited in Gerald Edward Markowitz, "Progressive Imperialism: Consensus and Conflict in the Progressive Movement on Foreign Policy, 1898–1917." PhD diss., University of Wisconsin, 1971, p. 375, an unfortunately neglected work on a highly important topic.</p>
<p><a href="#ref7" name="note7" id="note7">[7]</a> Hence the famous imprecation hurled at the end of the 1884 campaign that brought the Democrats into the presidency for the first time since the Civil War, that the Democratic Party was the party of "Rum, Romanism, and Rebellion." In that one phrase, the New York Protestant minister was able to sum up the political concerns of the pietist movement.</p>
<p><a href="#ref8" name="note8" id="note8">[8]</a> For an introduction to the growing literature of "ethnoreligious" political history in the United States, see Paul Kleppner, <em>The Cross of Culture</em> (New York: the Free Press, 1970); and idem, <em>The Third Electoral System</em>, <em>1853–1892</em> (Chapel Hill, N.C.: University of North Carolina Press, 1979). For the latest research on the formation of the Republican Party as a pietist party, reflecting the interconnected triad of pietist concerns — antislavery, prohibition, and anti-Catholicism — see William E. Gienapp, "Nativism and the Creation of a Republican Majority in the North before the Civil War," <em>Journal of American History</em> 72 (December 1985): 529–559.</p>
<p><a href="#ref9" name="note9" id="note9">[9]</a> German Lutherans were largely "high" or liturgical and confessional Lutherans who placed emphasis on the Church and its creed or sacraments rather than on a pietist, "born-again" emotional conversion experience. Scandinavian-Americans, on the other hand, were mainly pietist Lutherans.</p>
<p><a href="#ref10" name="note10" id="note10">[10]</a> Orthodox Augustinian Christianity, as followed by the liturgicals, is "a-millennialist," i.e., it believes that the "millennium" is simply a metaphor for the emergence of the Christian Church and that Jesus will return without human aid and at his own unspecified time. Modern "fundamentalists," as they have been called since the early years of the twentieth century, are "premillennialists," i.e., they believe that Jesus will return to usher in a thousand years of the Kingdom of God on Earth, a time marked by various "tribulations" and by Armageddon, until history is finally ended. Premillennialists, or "millennarians," do not have the statist drive of the postmillennialists; instead, they tend to focus on predictions and signs of Armageddon and of Jesus' advent.</p>
<p><a href="#ref11" name="note11" id="note11">[11]</a> James H. Timberlake, <em>Prohibition and the Progressive Movement, 1900–1920</em> (New York: Atheneum, 1970), pp. 7–8.</p>
<p><a href="#ref12" name="note12" id="note12">[12]</a> Quoted in Timberlake, <em>Prohibition</em>, p. 33.</p>
<p><a href="#ref13" name="note13" id="note13">[13]</a> The Progressive Party convention was a mighty fusion of all the major trends in the progressive movement: statist economists, technocrats, social engineers, social workers, professional pietists, and partners of J.P. Morgan & Co. Social Gospel leaders Lyman Abbon, the Rev. R. Heber Newton and the Rev. Washington Gladden, were leading Progressive Party delegates. The Progressive Party proclaimed itself as the "recrudescence of the religious spirit in American political life." Theodore Roosevelt's acceptance speech was significantly entitled "A Confession of Faith," and his words were punctuated by "amens" and by a continual singing of pietist Christian hymns by the assembled delegates. They sang "Onward Christian Soldiers," "The Battle Hymn of the Republic," and especially the revivalist hymn, "Follow, Follow, We Will Follow Jesus," with the word "Roosevelt" replacing "Jesus" at every turn. The horrified <em>New York Times</em> summed up the unusual experience by calling the Progressive grouping "a convention of fanatics." And it added, "It was not a convention at all. It was an assemblage of religious enthusiasts. It was such a convention as Peter the Hermit held. It was a Methodist camp following done over into political terms." Cited in John Allen Gable, <em>The Bull Moose Years: Theodore Roosevelt and the Progressive Party</em> (Port Washington, NY: Kennikat Press, 1978), p. 75.</p>
<p><a href="#ref14" name="note14" id="note14">[14]</a> Timberlake, <em>Prohibition</em>, p. 24.</p>
<p><a href="#ref15" name="note15" id="note15">[15]</a> Quoted in Timberlake, <em>Prohibition</em>, p. 27. Italics in the article. Or, as the Rev. Stelzle put it, in <em>Why Prohibition</em>!, "There is no such thing as an absolute individual right to do any particular thing, or to eat or drink any particular thing, or to enjoy the association of one's own family, or even to live, if that thing is in conflict with the law of public necessity." Quoted in David E. Kyvig, <em>Repealing National Prohibition</em> (Chicago: University of Chicago Press, 1979), p. 9.</p>
<p><a href="#ref16" name="note16" id="note16">[16]</a> Timberlake, <em>Prohibition</em>, pp. 37–38.</p>
<p><a href="#ref17" name="note17" id="note17">[17]</a> See David Burner, <em>Herbert Hoover: A Public Life</em> (New York: Alfred A. Knopf, 1979), p. 107.</p>
<p><a href="#ref18" name="note18" id="note18">[18]</a> James A. Burran, "Prohibition in New Mexico, 1917." <em>New Mexico Historical Quarterly</em> 48 (April 1973): 140–141. Mrs. Lindsey of course showed no concern whatever for the German, allied, and neutral countries of Europe being subjected to starvation by the British naval blockade. The only areas of New Mexico that resisted the prohibition crusade in the referendum in the November 1917 elections were the heavily Hispanic-Catholic districts.</p>
<p><a href="#ref19" name="note19" id="note19">[19]</a> Timberlake, <em>Prohibition</em>, p. 179.</p>
<p><a href="#ref20" name="note20" id="note20">[20]</a> Quoted in Timberlake, <em>Prohibition</em>, pp. 180–181.</p>
<p><a href="#ref21" name="note21" id="note21">[21]</a> Quoted in Alan P. Grimes, <em>The Puritan Ethic and Woman Suffrage</em> (New York: Oxford University Press, 1967), p. 78.</p>
<p><a href="#ref22" name="note22" id="note22">[22]</a> Grimes, <em>Puritan Ethic</em>, p. 116.</p>
<p><a href="#ref23" name="note23" id="note23">[23]</a> Ida Clyde Clarke, <em>American Women and the World War</em> (New York: D. Appleton and Co., 1918), p. 19.</p>
<p><a href="#ref24" name="note24" id="note24">[24]</a> Clarke, <em>American Women</em>, p. 27.</p>
<p><a href="#ref25" name="note25" id="note25">[25]</a> Ibid., p. 31. Actually Mrs. Tarbell's muckraking activities were pretty much confined to Rockefeller and Standard Oil. She was highly favorable to business leaders in the Morgan ambit, as witness her laudatory biographies of Judge Elbert H. Gary, of US Steel (1925) and Owen D. Young of General Electric (1932).</p>
<p><a href="#ref26" name="note26" id="note26">[26]</a> Ibid., p. 277, pp. 275–279, p. 58.</p>
<p><a href="#ref27" name="note27" id="note27">[27]</a> Ibid., p. 183.</p>
<p><a href="#ref28" name="note28" id="note28">[28]</a> Ibid., p. 103.</p>
<p><a href="#ref29" name="note29" id="note29">[29]</a> Ibid., pp. 104–105.</p>
<p><a href="#ref30" name="note30" id="note30">[30]</a> Ibid., p. 101.</p>
<p><a href="#ref31" name="note31" id="note31">[31]</a> Ibid., p. 129. Margaret Dreier Robins and her husband Raymond were virtually a paradigmatic progressive couple. Raymond was a Florida-born wanderer and successful gold prospector who underwent a mystical conversion experience in the Alaska wilds and became a pietist preacher. He moved to Chicago, where he became a leader in Chicago settlement house work and municipal reform. Margaret Dreier and her sister Mary were daughters of a wealthy and socially prominent New York family who worked for and financed the emergent National Women's Trade Union League. Margaret married Raymond Robins in 1905 and moved to Chicago, soon becoming longtime president of the league. In Chicago, the Robinses led and organized progressive political causes for over two decades, becoming top leaders of the Progressive Party from 1912 to 1916. During the war, Raymond Robins engaged in considerable diplomatic activity as head of a Red Cross mission to Russia. On the Robinses, see Allen F. Davis, <em>Spearhead for Reform: the Social Settlements and the Progressive Movement, 1890–1914</em> (New York: Oxford University Press, 1967).</p>
<p><a href="#ref32" name="note32" id="note32">[32]</a> For more on women's war work and woman suffrage, see the standard history of the suffrage movement, Eleanor Flexner, <em>Century of Struggle: The Woman's Rights Movement in the United States</em> (New York: Atheneum, 1968), pp. 288–289. Interestingly, The National War Labor Board (NWLB) frankly adopted the concept of "equal pay for equal work in order to limit the employment of women workers by imposing higher costs on the employer. The "only check," affirmed the NWLB, on excessive employment of women "is to make it no more profitable to employ women than men." Quoted in Valerie I. Conner, "'The Mothers of the Race' in World War I: The National War Labor Board and Women in Industry," <em>Labor History</em> 21 (Winter 1979–80): 34.</p>
<p><a href="#ref33" name="note33" id="note33">[33]</a> See Raymond B. Fosdick, <em>Chronicle of a Generation: An Autobiography</em> (New York: Harper & Bros., 1958), p. 133. Also see Peter Collier and David Horowitz, <em>The Rockefellers: An American Dynasty</em> (New York: New American Library, 1976), pp. 103–105. Fosdick was particularly appalled that American patrolmen on street duty actually smoked cigars! Fosdick, <em>Chronicle</em>, p. 135.</p>
<p><a href="#ref34" name="note34" id="note34">[34]</a> The American Social Hygiene Association, with its influential journal <em>Social Hygiene</em>, was the major organization in what was known as the "purity crusade." The association was launched when the New York physician Dr. Prince A. Marrow, inspired by the agitation against venereal disease and in favor of the continence urged by the French syphilographer, Jean-Alfred Fournier, formed in 1905 the American Society for Sanitary and Moral Prophylaxis (ASSMP). Soon, the terms proposed by the Chicago branch of ASSMP, "social hygiene" and "sex hygiene," became widely used for their medical and scientific patina, and in 1910 ASSMP changed its name to the American Federation for Sex Hygiene (AFSH). Finally, in late 1913, AFSH, an organization of physicians, combined with the National Vigilance Association (formerly the American Purity Alliance), a group of clergymen and social workers, to form the all-embracing American Social Hygiene Association (ASHA).</p>
<p>In this social hygiene movement, the moral and medical went hand in hand. Thus Dr. Morrow welcomed the new knowledge about venereal disease because it demonstrated that "punishment for sexual sin" no longer had to be "reserved for the hereafter."</p>
<p>The first president of ASHA was the president of Harvard University, Charles W. Eliot. In his address to the first meeting, Eliot made clear that total abstinence from alcohol, tobacco, and even spices was part and parcel of the anti-prostitution and purity crusade.</p>
<p>On physicians, the purity crusade, and the formation of ASHA, see Ronald Hamowy, "Medicine and the Crimination of Sin: 'Self-Abuse' in 19th Century America," The <em>Journal of Libertarian Studies</em> I (Summer 1972): 247–259; James Wunsch, "Prostitution and Public Policy: From Regulation to Suppression, 1858–1920," PhD diss., University of Chicago, 1976; and Roland R. Wagner, "Virtue Against Vice: A Study of Moral Reformers and Prostitution in the Progressive Era," PhD diss., University of Wisconsin, 1971. On Morrow, also see John C. Burnham. "The Progressive Era Revolution in American Attitudes Toward Sex," <em>Journal of American History</em> 59 (March 1973) 899, and Paul Boyer, <em>Urban Masses and Moral Order in America, 1820–1920</em> (Cambridge Harvard University Press, 1978), p 201. Also see Burnham, "Medical Specialists and Movements Toward Social Control in the Progressive Era: Three Examples," in J. Israel, ed., <em>Building the Organizational Society: Essays in Associational Activities in Modem America</em> (New York: Free Press, 1972), pp. 24–26.</p>
<p><a href="#ref35" name="note35" id="note35">[35]</a> In Daniel R. Beaver, <em>Newton D. Baker and the American War Effort 1917–1919</em> (Lincoln, Nebr.: University of Nebraska Press, 1966), p. 222. Also see ibid., pp. 221–224; and C.H. Cramer, <em>Newton D. Baker: A Biography</em> (Cleveland: World Publishing Co., l96l), pp. 99–102.</p>
<p><a href="#ref36" name="note36" id="note36">[36]</a> Fosdick, <em>Chronicle</em>, pp. 145–147. While prostitution was indeed banned in Storyville after 1917, Storyville, contrary to legend, never "closed" — the saloons and dance halls remained open, and contrary to orthodox accounts, jazz was never really shut down in Storyville or New Orleans, and it was therefore never forced up river. For a revisionist view of the impact of the closure of Storyville on the history of jazz, see Tom Bethell, <em>George Lewis: A Jazzman from New Orleans</em> (Berkeley: University of California Press, 1977), pp. 6–7; and Al Rose, <em>Storyville, New Orleans</em> (Montgomery, Ala.: University of Alabama Press, 1974). Also, on later Storyville, see Boyer, <em>Urban Masses</em>, p. 218.</p>
<p><a href="#ref37" name="note37" id="note37">[37]</a> See Hamowy, "Crimination of Sin," p. 226 <em>n</em>. The quote from Clemenceau is in Fosdick, <em>Chronicle</em>, p. 171. Newton Baker's loyal biographer declared that Clemenceau, in this response, showed "his animal proclivities as the 'Tiger of France.'" Cramer, <em>Newton Baker</em>, p. 101.</p>
<p><a href="#ref38" name="note38" id="note38">[38]</a> Clarke, <em>American Women</em>, pp. 90, 87, 93. In some cases, organized women took the offensive to help stamp out vice and liquor in their community. Thus in Texas in 1917 the Texas Women's Anti-Vice Committee led in the creation of a "White Zone" around all the military bases. By autumn the Committee expanded into the Texas Social Hygiene Association to coordinate the work of eradicating prostitution and saloons. San Antonio proved to be its biggest problem. Lewis L. Gould, <em>Progressives and Prohibitionists: Texas Democrats in the Wilson Era</em> (Austin: University of Texas Press, 1973), p. 227.</p>
<p><a href="#ref39" name="note39" id="note39">[39]</a> Davis, <em>Spearheads for Reform</em>, p. 225.</p>
<p><a href="#ref40" name="note40" id="note40">[40]</a> Fosdick, <em>Chronicle</em>, p. 144. After the war, Raymond Fosdick went on to fame and fortune, first as Under Secretary General of the League of Nations, and then for the rest of his life as a member of the small inner circle close to John D. Rockefeller, Jr. In that capacity, Fosdick rose to become head of the Rockefeller Foundation and Rockefeller's official biographer. Meanwhile, Fosdick's brother, Rev. Harry Emerson, became Rockefeller's hand-picked parish minister, first at Park Avenue Presbyterian Church and then at the new interdenominational Riverside Church, built with Rockefeller funds. Harry Emerson Fosdick was Rockefeller's principal aide in battling, within the Protestant Church, in favor of postmillennial, statist, "liberal" Protestantism and against the rising tide of premillennial Christianity, known as "fundamentalist" since the years before World War I. See Collier and Horowitz, <em>The Rockefellers</em>, pp. 140–142, 151–153.</p>
<p><a href="#ref41" name="note41" id="note41">[41]</a> Davis, <em>Spearheads for Reform</em>, p. 226; Timberlake, <em>Prohibition</em>, p. 66; Boyer, <em>Urban Masses</em>, p. 156.</p>
<p><a href="#ref42" name="note42" id="note42">[42]</a> Eleanor H. Woods, <em>Robert A. Woods; Champion of Democracy</em> (Boston: Houghton Mifflin, 1929), p. 316. Also see ibid., pp. 201–202, 250ff., 268ff.</p>
<p><a href="#ref43" name="note43" id="note43">[43]</a> Davis, <em>Spearheads for Reform</em>, p. 227.</p>
<p><a href="#ref44" name="note44" id="note44">[44]</a> H.L. Mencken, "Professor Veblen," in <em>A Mencken Chrestomathy</em> (New York: Alfred A. Knopf, 1949), p. 267.</p>
<p><a href="#ref45" name="note45" id="note45">[45]</a> Quoted in the important article by Jean B. Quandt, "Religion and Social Thought: The Secularization of Postmillennialism," <em>American Quarterly</em> 25 (October 1973): 404. Also see John Blewett, S.J., "Democracy as Religion: Unity in Human Relations," in Blewett, ed., <em>John Dewey: His Thought and Influence</em> (New York: Fordham University Press, 1960), pp. 33–58; and <em>John Dewey: The Early Works, 1882–1989</em>, eds., J. Boydstan et al., (Carbondale: Southern Illinois University Press, 1969–71), vols. 2 and 3.</p>
<p><a href="#ref46" name="note46" id="note46">[46]</a> On the general secularization of postmillennial pietism after 1900, see Quandt, "Religion and Social Thought," pp. 390–409; and James H. Moorhead, "The Erosion of Postmillennialism in American Religious Thought, 1865–1925," <em>Church History</em> 53 (March 1984): 61–77.</p>
<p><a href="#ref47" name="note47" id="note47">[47]</a> Carol S. Gruber, <em>Mars and Minerva: World War I and the Uses of the Higher Learning in America</em> (Baton Rouge: Louisiana State University Press, 1975), p. 92.</p>
<p><a href="#ref48" name="note48" id="note48">[48]</a> Quoted in Gruber, <em>Mars and Minerva</em>, pp. 92–93. Also see William E. Leuchtenburg, "The New Deal and the Analogue of War," in J. Braeman, R. Bremner, and E. Walters, eds., <em>Change and Continuity in Twentieth-Century America</em> (New York: Harper & Row, l966), p. 89. For similar reasons, Thorstein Veblen, prophet of the alleged dichotomy of production for profit vs. production for use, championed the war and began to come out openly for socialism in an article in the <em>New Republic</em> in 1918, later reprinted in his <em>The Vested Interests and the State of the Industrial Arts</em> (1919). See Charles Hirschfeld, "Nationalist Progressivism and World War I," <em>Mid-America</em> 45 (July 1963), p. 150. Also see David Riesman, <em>Thorstein Veblen: A Critical Interpretation</em> (New York: Charles Scribner's Sons, 1960), pp. 30–31.</p>
<p><a href="#ref49" name="note49" id="note49">[49]</a> Hirschfeld, "Nationalist Progressivism," p. 150.</p>
<p><a href="#ref50" name="note50" id="note50">[50]</a> Gruber, <em>Mars and Minerva</em>, p. 92.</p>
<p><a href="#ref51" name="note51" id="note51">[51]</a> Hirschfeld, "Nationalist Progressivism," p. 142. It is intriguing that for the <em>New Republic</em> intellectuals, actually existent private individuals are dismissed as "mechanical," whereas nonexistent entities such as "national and social" forces are hailed as being "organic."</p>
<p><a href="#ref52" name="note52" id="note52">[52]</a> Quoted in Hirschfeld, "Nationalist Progressivism," p. 147. A minority of pro-war Socialists broke off from the antiwar Socialist Party to form the Social Democratic League, and to join a pro-war front organized and financed by the Wilson administration, the American Alliance for Labor and Democracy. The pro-war socialists welcomed the war as providing "startling progress in collectivism," and opined that after the war, the existent state socialism would be advanced toward "democratic collectivism." The pro-war socialists included John Spargo, Algie Simons, W.J. Ghent, Robert R. LaMonte, Charles Edward Russell, J.G. Phelps Stokes, Upton Sinclair, and William English Walling. Walling so succumbed to war fever that he denounced the Socialist Party as a conscious tool of the Kaiser and advocated the suppression of freedom of speech for pacifists and for antiwar socialists. See Hirschfeld, "Nationalist Progressivism," p. 143. On Walling, see James Gilbert, <em>Designing the Industrial State: The Intellectual Pursuit of Collectivism in America, 1880–1940</em> (Chicago: Quadrangle Books, 1972), pp. 232–233. On the American Alliance for Labor and Democracy and its role in the war effort, see Ronald Radosh, <em>American Labor and United States Foreign Policy</em> (New York: Random House, l969), pp. 58–71.</p>
<p><a href="#ref53" name="note53" id="note53">[53]</a> In fact, Jacob Lippmann was to contract cancer in 1925 and die two years later. Moreover, Lippmann, before and after Jacob's death, was supremely indifferent to his father. Ronald Steel, <em>Walter Lippman and the American Century</em> (New York: Random House, l981), p. 5, pp. 116–117. On Walter Lippmann's enthusiasm for conscription, at least for others, see Beaver, <em>Newton Baker</em>, pp. 26–27.</p>
<p><a href="#ref54" name="note54" id="note54">[54]</a> Hirschfeld, "Nationalist Progressivism," pp. 148–150. On the <em>New Republic</em> and the war, and particularly on John Dewey, also see Christopher Lasch, <em>The New Radicalism in America, 1889–1963: The Intellectual as a Social Type</em> (New York: Vintage Books, 1965), pp. 181–224, especially pp. 202–204. On the three <em>New Republic</em> editors, see Charles Forcey, <em>The Crossroads of Liberalism: Croly, Weyl, Lippmann and the Progressive Era, 1900–1925</em> (New York: Oxford University Press, 1961). Also see David W. Noble, "The <em>New Republic</em> and the Idea of Progress, 1914–1920," <em>Mississippi Valley Historical Review</em>, 38 (December 1951): 387–402. In a book titled <em>The End of the War</em> (1918), <em>New Republic</em> editor Walter Weyl assured his readers that "the new economic solidarity once gained, can never again be surrendered." Cited in Leuchtenburg. "New Deal," p. 90.</p>
<p><a href="#ref55" name="note55" id="note55">[55]</a> Rexford Guy Tugwell, "America's War-Time Socialism" <em>The Nation</em> (1927), pp. 364–365. Quoted in Leuchtenburg, "The New Deal," pp. 90–91.</p>
<p><a href="#ref56" name="note56" id="note56">[56]</a> In January 1927, Croly wrote a <em>New Republic</em> editorial, "An Apology for Fascism," endorsing an accompanying article, "Fascism for the Italians," written by the distinguished philosopher Horace M. Kallen, a disciple of John Dewey and an exponent of progressive pragmatism. Kallen praised Mussolini for his pragmatic approach, and in particular for the <em>élan vital</em> that Mussolini had infused into Italian life. True, Professor Kallen conceded, fascism is coercive, but surely this is only a temporary expedient. Noting fascism's excellent achievement in economics, education, and administrative reform, Kallen added that "in this respect the Fascist revolution is not unlike the Communist revolution. Each is the application by force …of an ideology to a condition. Each should have the freest opportunity once it has made a start…." The accompanying <em>New Republic</em> editorial endorsed Kallen's thesis and added that "alien critics should beware of outlawing a political experiment which aroused in a whole nation an increased moral energy and dignified its activities by subordinating them to a deeply felt common purpose." <em>New Republic</em> 49 (January 12, 1927), pp. 207–213. Cited in John Patrick Diggins, "Mussolini's Italy: The View from America," PhD diss., University of Southern California, 1964, pp. 214–217.</p>
<p><a href="#ref57" name="note57" id="note57">[57]</a> Born in Ireland, David Croly became a distinguished journalist in New York City and rose to the editorship of the <em>New York World</em>. Croly organized the first Positivist Circle in the United States and financed an American speaking tour for the Comtian Henry Edgar. The Positivist Circle met at Croly's home, and in 1871 David Croly published <em>A Positivist Primer</em>. When Herbert was born in 1869, he was consecrated by his father to the Goddess Humanity, the symbol of Comte's Religion of Humanity. See the illuminating recent biography of Herbert by David W. Levy, <em>Herbert Croly of the New Republic</em> (Princeton: Princeton University Press; 1985).</p>
<p><a href="#ref58" name="note58" id="note58">[58]</a> See Jerry Israel, <em>Progressivism and the Open Door: America and China, 1905–1921</em> (Pittsburgh: University of Pittsburgh Press, 1971).</p>
<p><a href="#ref59" name="note59" id="note59">[59]</a> For a refreshingly acidulous portrayal of the actions of the historians in World War I, see C. Hartley Grattan, "The Historians Cut Loose," <em>American Mercury</em>, August 1927, reprinted in Haw Elmer Barnes, <em>In Quest of Truth and Justice</em>, 2nd ed. (Colorado Springs: Ralph Myles Publisher, 1972), pp. 142–164. A more extended account is George T. Blakey, <em>Historians on the Homefront: American Propagandists for the Great War</em> (Lexington: University Press of Kentucky, 1970). Gruber, <em>Mars and Minerva</em>, deals with academia and social scientism, but concentrates an historians. James R. Mock and Cedric Larson, <em>Words that Won the War</em> (Princeton University Press, 1939), presents the story of the "Creel Committee," the Committee on Public Information, the official propaganda ministry during the war.</p>
<p><a href="#ref60" name="note60" id="note60">[60]</a> See the useful biography of Ely, Benjamin G. Rader, <em>The Academic Mind and Reform: The Influence of Richard T. Ely in American Life</em> (Lexington: University Press of Kentucky, 1966).</p>
<p><a href="#ref61" name="note61" id="note61">[61]</a> Sidney Fine, <em>Laissez Faire and the General-Welfare State: A Study of Conflict in American Thought 1865–1901</em> (Ann Arbor: Univenity of Michigan Press, 1956), pp.239–240.</p>
<p><a href="#ref62" name="note62" id="note62">[62]</a> Fine, <em>Laissez Faire</em>, pp. 180–181.</p>
<p><a href="#ref63" name="note63" id="note63">[63]</a> John Rogers Commons was of old Yankee stock, descendant of John Rogers, Puritan martyr in England, and born in the Yankee area of the Western Reserve in Ohio and reared in Indiana. His Vermont mother was a graduate of the hotbed of pietism, Oberlin College, and she sent John to Oberlin in the hopes that he would become a minister. While in college, Commons and his mother launched a prohibitionist publication at the request of the Anti-Saloon League. After graduation, Commons went to Johns Hopkins to study under Ely, but flunked out of graduate school. See John R. Commons, <em>Myself</em> (Madison, Wisc.: University of Wisconsin Press, 1964). Also see Joseph Dorfman, <em>The Economic Mind in American Civilization</em> (New York: Viking, 1949), vol. 3. 276–277; Mary O. Furner, <em>Advocacy and Objectivity: A Crisis in the Professionalization of American Social Science, 1865–1905</em> (Lexington: University Press of Kentucky, 1975), pp. 198–204.</p>
<p><a href="#ref64" name="note64" id="note64">[64]</a> Quandt, "Religion and Social Thought," pp. 402–403. Ely did not expect the millennial Kingdom to be far off. He believed that it was the task of the universities and of the social sciences "to teach the complexities of the Christian duty of brotherhood in order to arrive at the New Jerusalem "which we are all eagerly awaiting." The church's mission was to attack every evil institution, "until the earth becomes a new earth, and all its cities, cities of God."</p>
<p><a href="#ref65" name="note65" id="note65">[65]</a> Gruber, <em>Mars and Minerva</em>, p. 114.</p>
<p><a href="#ref66" name="note66" id="note66">[66]</a> See Rader, <em>Academic Mind</em>, pp. 181–191. On top big business affiliations of National Security League leaders, especially J.P. Morgan and others in the Morgan ambit, see C. Hartley Grattan, <em>Why We Fought</em> (New York Vanguard Press, 1929) pp. 117–118, and Robert D. Ward, "The Origin and Activities of the National Security League, 1914–1919," <em>Mississippi Valley Historical Review</em>, 47 (June 1960): 51–65.</p>
<p><a href="#ref67" name="note67" id="note67">[67]</a> The Chamber of Commerce of the United States spelled out the long-run economic benefit of conscription, that for America's youth it would "substitute a period of helpful discipline for a period of demoralizing freedom from restraint." John Patrick Finnegan, Against the Specter of Dragon: The Campaign for American Military Preparedness, 1914–1917 (Westport, Conn.: Greenwood Press, 1974), p. 110. On the broad and enthusiastic support given to the draft by the Chamber of Commerce, see Chase C. Mooney and Martha E. Layman, "Some Phases of the Compulsory Military Training Movement, 1914–1920," <em>Mississippi Historical Review</em> 38 (March 1952): 640.</p>
<p><a href="#ref68" name="note68" id="note68">[68]</a> Richard T. Ely, <em>Hard Times: The Way in and the Way Out</em> (1931), cited in Joseph Dorfman, <em>The Economic Mind in American Civilization</em> (New Yark: Viking, 1949). vol. 5, p. 671; and in Leuchtenburg, "The New Deal," p. 94.</p>
<p><a href="#ref69" name="note69" id="note69">[69]</a> Ely drew up a super-patriotic pledge for the Madison chapter of the Loyalty Legion, pledging its members to "stamp out disloyalty." The pledge also expressed unqualified support for the Espionage Act and vowed to "work against La Follettism in all its anti-war forms." Rader, <em>Academic Mind</em>, pp. 183ff.</p>
<p><a href="#ref70" name="note70" id="note70">[70]</a> Gruber, <em>Mars and Minerva</em>, p. 207.</p>
<p><a href="#ref71" name="note71" id="note71">[71]</a> Ibid., pp. 208, 208n.</p>
<p><a href="#ref72" name="note72" id="note72">[72]</a> Ibid., pp. 209–210. In his autobiography, written in 1938, Richard Ely rewrote history to cover up his ignominious role in the get–La Follette campaign. He acknowledged signing the faculty petition, but then had the temerity to claim that he "was not one of the ring-leaders, as La Follette thought, in circulating this petition…." There is no mention of his secret research campaign against La Follette.</p>
<p><a href="#ref73" name="note73" id="note73">[73]</a> For more an the anti-La Follette campaign, see H.C. Peterson and Gilbert C. Fite, <em>Opponents of War: 1917–1918</em> (Madison: University of Wisconsin Press, 1957), pp. 68–72; Paul L. Murphy, World War I and the Origin of Civil Liberties in the United States (New York: W.W. Norton, 1979), p. 120; and Belle Case La Follette and Fola La Follette, <em>Robert M. LaFollette</em> (New York: Macmillan, 1953), volume 2.</p>
<p><a href="#ref74" name="note74" id="note74">[74]</a> Thus, T.W. Hutchison, from a very different perspective, notes the contrast between Carl Menger's stress on the beneficent, unplanned phenomena of society, such as the free market, and the growth of "social self-consciousness" and government planning. Hutchison recognizes that a crucial component of that social self-consciousness is government statistics. T.W. Hutchison, <em>A Review of Economic Doctrines, 1870–1929</em> (Oxford: Clarendon Press, 1953), pp. 150–151, 427.</p>
<p><a href="#ref75" name="note75" id="note75">[75]</a> Fine, <em>Laissez-Faire</em>, p. 207.</p>
<p><a href="#ref76" name="note76" id="note76">[76]</a> Solomon Fabricant, <em>The Trend of Government Activity in the United States since 1900</em> (New York: National Bureau of Economic Research, 1952), p. 143. Similarly, an authoritative work on the growth of government in England puts it this way: "The accumulation of factual information about social conditions and the development of economics and the social sciences increased the pressure for government intervention…. As statistics improved and students of social conditions multiplied, the continued existence of such conditions was kept before the public. Increasing knowledge of them aroused influential circles and furnished working class movements with factual weapons." Moses Abramovitz and Vera F. Eliasberg, <em>The Growth of Public Employment in Great Britain</em> (Princeton: National Bureau of Economic Research, 1957), pp. 22–23, 30. Also see M.I. Cullen, <em>The Statistical Movement in Early Victorian Britain: The Foundations of Empirical Social Research</em> (New York: Barnes & Noble, 1975).</p>
<p><a href="#ref77" name="note77" id="note77">[77]</a> See Joseph Dorfman, "The Role of the German Historical School in American Economic Thought." <em>American Economic Review, Papers and Proceedings</em> 45 (May 1955), p. 18. George Hildebrand remarked on the inductive emphasis of the German Historical School that "perhaps there is, then, some connection between this kind of teaching and the popularity of crude ideas of physical planning in more recent times." George H. Hildebrand, "International Flow of Economic Ideas-Discussion," ibid., p. 37.</p>
<p><a href="#ref78" name="note78" id="note78">[78]</a> Dorfman, "Role," p. 23. On Wright and Adams, see Joseph Dorfman, <em>The Economic Mind in American Civilization</em> (New York: Viking Press, 1949), vol. 3, 164–174, 123; and Boyer, <em>Urban Masses</em>, p. 163. Furthermore, the first professor of statistics in the United States, Roland P. Falkner, was a devoted student of Engel's and a translator of the works of Engel's assistant, August Meitzen.</p>
<p><a href="#ref79" name="note79" id="note79">[79]</a> Irving Norton Fisher, <em>My Father Irving Fisher</em> (New York: Comet Press, 1956), pp. 146–147. Also for Fisher, see <em>Irving Fisher,</em> <em>Stabilised Money</em> (London: Allen & Unwin, 1935), p. 383.</p>
<p><a href="#ref80" name="note80" id="note80">[80]</a> Fisher, <em>My Father</em>, pp. 264–267. On Fisher's role and influence during this period, see Murray N. Rothbard, <a href="http://store.mises.org/Americas-Great-Depression-P63C18.aspx"><em>America's Great Depression</em></a>, 4th ed. (New York: Richardson & Snyder, 1983). Also see Joseph S. Davis, <em>The World Between the Wars, 1919–39, An Economist's View</em> (Baltimore: Johns Hopkins University Press, 1975), p. 194; and Melchior Palyi, <em>The Twilight of Gold, 1914–1936: Myth and Realities</em> (Chicago: Henry Regnery, 1972), pp. 240, 249.</p>
<p><a href="#ref81" name="note81" id="note81">[81]</a> Wesley C. Mitchell was of old Yankee pietist stock. His grandparents were farmers in Maine and then in Western New York. His father followed the path of many Yankees in migrating to a farm in northern Illinois. Mitchell attended the University of Chicago, where he was strongly influenced by Veblen and John Dewey. Dorfman, <em>Economic Mind</em>, vol. 3, 456.</p>
<p><a href="#ref82" name="note82" id="note82">[82]</a> Dorfman, <em>Economic Mind</em>, vol. 4, 376, 361.</p>
<p><a href="#ref83" name="note83" id="note83">[83]</a> Emphasis added. Lucy Sprague Mitchell, <em>Two Lives</em> (New York: Simon and Schuster, 1953), p. 363. For more on this entire topic, see Murray N. Rothbard, "The Politics of Political Economists: Comment," <em>Quarterly Journal of Economics</em> 74 (November 1960): 659–665.</p>
<p><a href="#ref84" name="note84" id="note84">[84]</a> See in particular James Weinstein, <em>The Corporate Ideal in the Liberal State, 1900–1918</em> (Boston: Beacon Press, 1968); and Samuel P. Hays, "The Politics of Reform in Municipal Government in the Progressive Era," <em>Pacific Northwest Quarterly</em> 59 (October 1961), pp. 157–169.</p>
<p><a href="#ref85" name="note85" id="note85">[85]</a> David Eakins, "The Origins of Corporate Liberal Policy Research, 1916–1922: The Political-Economic Expert and the Decline of Public Debate," in Israel, ed., <em>Building the Organizational Society</em>, p. 161.</p>
<p><a href="#ref86" name="note86" id="note86">[86]</a> Herbert Heaton, <em>Edwin F. Gay, A Scholar in Action</em> (Cambridge: Harvard University Press, 1952). Edwin Gay was born in Detroit of old New England stock. His father had been born in Boston and went into his father-in-law's lumber business in Michigan. Gay's mother was the daughter of a wealthy preacher and lumberman. Gay entered the University of Michigan, was heavily influenced by the teaching of John Dewey, and then stayed in graduate school in Germany for over a dozen years, finally obtaining his PhD in economic history at the University of Berlin. The major German influences on Gay were Gustav Schmoller, head of the Historical School, who emphasized that economics must be an "inductive science," and Adolf Wagner, also at the University of Berlin, who favored large-scale government intervention in the economy in behalf of Christian ethics. Back at Harvard, Gay was the major single force, in collaboration with the Boston Chamber of Commerce, in pushing through a factory inspection act in Massachusetts, and in early 1911 Gay became president of the Massachusetts branch of the American Association for Labor Legislation, an organization founded by Richard T. Ely and dedicated to agitating for government intervention in the area of labor unions, minimum wage rates, unemployment, public works, and welfare.</p>
<p><a href="#ref87" name="note87" id="note87">[87]</a> On the pulling and hauling among Rockefeller advisers on The Institute of Economic Research, see David M. Grossman, "American Foundations and the Support of Economic Research, 1913–29," <em>Minerva</em> 22 (Spring–Summer 1982): 62–72.</p>
<p><a href="#ref88" name="note88" id="note88">[88]</a> See Eakins, "Origins," pp. 166–167; Grossman, "American Foundations," pp. 76–78; Heaton, Edwin F. Gay. On Stone, see Dorfman, <em>Economic Mind</em>, vol. 4, 42, 60–61; and Samuel Haber, <em>Efficiency and Uplift: Scientific Management in the Progressive Era 1890–1920</em> (Chicago: University of Chicago Press, 1964), pp. 152, 165. During his Marxist period, Stone had translated Marx's <em>Poverty of Philosophy</em>.</p>
<p><a href="#ref89" name="note89" id="note89">[89]</a> See Guy Alchon, <em>The Invisible Hand of Planning: Capitalism, Social Science, and the State in the 1920's</em> (Princeton: Princeton University Press, 1985), pp. 54ff.</p>
<p><a href="#ref90" name="note90" id="note90">[90]</a> Collier and Horowitz, <em>The Rockefellers</em>, p. 140.</p>
<p><a href="#ref91" name="note91" id="note91">[91]</a> Eakins, "Origins," p. 168. Also see Furner, <em>Advocacy and Objectivity</em>, pp. 282–286.</p>
<p><a href="#ref92" name="note92" id="note92">[92]</a> Stephen Skowronek, <em>Building a New American State: The Expansion of the National Administrative Capacities, 1877–1920</em> (Cambridge: Cambridge University Press, 1982), pp. 187–188.</p>
<p><a href="#ref93" name="note93" id="note93">[93]</a> Vice-chairman of the IGR was retired St. Louis merchant and lumberman and former president of Washington University of St. Louis, Robert S. Brookings. Secretary of the IGR was James F. Curtis, formerly Assistant Secretary of the Treasury under Taft and now secretary and deputy governor of the New York Federal Reserve Bank. Others on the board of the IGR were ex-President Taft; railroad executive Frederick A. Delano, uncle of Franklin D. Roosevelt and member of the Federal Reserve Board; Arthur T. Hadley, economist and president of Yale; Charles C. Van Hise, progressive president of the University of Wisconsin, and ally of Ely; reformer and influential young Harvard Law professor, Felix Frankfurter; Theodore N. Vail, chairman of AT&T; progressive engineer and businessman, Herbert C. Hoover; and financier R. Fulton Cutting, an officer of the New York Bureau of Municipal Research. Eakins, "Origins," pp. 168–169.</p>
<p><a href="#ref94" name="note94" id="note94">[94]</a> On the Commercial Economy Board, see Grosvenor B. Clarkson, <em>Industrial America in the World War: The Strategy Behind the Line, 1917–1918</em> (Boston: Houghton Mifilin, 1923), pp. 211ff.</p>
<p><a href="#ref95" name="note95" id="note95">[95]</a> Alchon, <em>Invisible Hand</em>, p. 29. Mitchell headed the price statistics section of the Price-Fixing Committee of the War Industries Board.</p>
<p><a href="#ref96" name="note96" id="note96">[96]</a> Heaton, <em>Edwin Gay</em>, p. 129.</p>
<p><a href="#ref97" name="note97" id="note97">[97]</a> See Rothbard, "War Collectivism," pp. 100–112.</p>
<p><a href="#ref98" name="note98" id="note98">[98]</a> See Heaton, <em>Edwin Gay</em>, pp. 129ff; and the excellent book on the Inquiry, Lawrence E. Gelfand, <em>The Inquiry: American Preparations for Peace, 1917–1919</em> (New Haven: Yale University Press, 1963), pp. 166–168, 177–178.</p>
<p><a href="#ref99" name="note99" id="note99">[99]</a> Heaton, <em>Edwin Gay</em>, p. 135. Also see Alchon, <em>Invisible Hand</em>, pp. 35–36.</p>
<p><a href="#ref100" name="note100" id="note100">[100]</a> In 1939 the Bureau of the Budget would be transferred to the Executive Office, thus completing the IGR objective.</p>
<p><a href="#ref101" name="note101" id="note101">[101]</a> Moulton was a professor of economics at the University of Chicago, and vice-president of the Chicago Association of Commerce. See Eakins, "Origins," pp. 172–177; Dorfman, <em>Economic Mind</em>, vol. 4, 11, 195–197.</p>
<p><a href="#ref102" name="note102" id="note102">[102]</a> Gay had been recommended to the group by one of its founders, Thomas W. Lamont. It was Gay's suggestion that the CFR begin its major project by establishing an "authoritative" journal, <em>Foreign Affairs</em>. And it was Gay who selected his Harvard historian colleague Archibald Cary Coolidge as the first editor and the <em>New York Post</em> reporter Hamilton Fish Armstrong as assistant editor and executive director of the CFR. See Lawrence H. Shoup and William Minter, <em>Imperial Brain Trust: The Council on Foreign Relations and United States Foreign Policy</em> (New York: Monthly Review Press, 1977), pp. 16–19, 105, 110.</p>
<p><a href="#ref103" name="note103" id="note103">[103]</a> Ellis W. Hawley, "Herbert Hoover and Economic Stabilization, 1921–22," in E. Hawley, ed., <em>Herbert Hoover as Secretary of Commerce: Studies in New Era Thought and Practice</em> (Iowa City: University of Iowa Press, 1981), p. 52.</p>
<p><a href="#ref104" name="note104" id="note104">[104]</a> Hawley, "Herbert Hoover," p. 53. Also see ibid., pp. 42–54. On the continuing collaboration between Hoover, Gay, and Mitchell throughout the 1920s see Alchon, <em>Invisible Hand</em>.</p>
<p><a href="#ref105" name="note105" id="note105">[105]</a> Alchon, <em>Invisible Hand</em>, pp. 39–42; Dorfman, <em>Economic Mind</em>, vol. 3, 490.</p>
<p><a href="#ref106" name="note106" id="note106">[106]</a> One exception was the critical review in the <em>Commercial and Financial Chronicle</em> (May 18, 1929), which derided the impression given the reader that the capacity of the United States "for continued prosperity is well-nigh unlimited." Quoted in Davis, <em>World Between the Wars</em>, p. 144. Also on <em>Recent Economic Changes</em> and economists' opinions at the time, see ibid., pp. 136–151, 400–417; David W. Eakins, "The Development of Corporate Liberal Policy Research in the United States, 1885–1965," PhD diss., doctoral dissertation University of Wisconsin, 1966, pp. 166–169, 205; and Edward Angly, comp., <em>Oh Yeah?</em> (New York: Viking Press, 1931).</p>
<p><a href="#ref107" name="note107" id="note107">[107]</a> In 1930, Hunt published a book-length, popularizing summary, <em>An Audit of America</em>. On <em>Recent Economic Changes</em>, also see Alchon, <em>Invisible Hand</em>, pp. 129–133, 135–142, 145–151, 213.</p>
<p><a href="#ref108" name="note108" id="note108">[108]</a> <em>Department of Labor — FSA Appropriation Bill for 1945</em>. Hearings Before the Subcommittee on Appropriations. 78th Congress, 2nd Session, Part I (Washington, 1945), pp. 258f., 276f. Quoted in Rothbard, "Politics of Political Economists," p. 665. On the growth of economists and statisticians in government, especially during wartime, see also Herbert Stein, "The Washington Economics Industry," <em>American Economic Association Papers and Proceedings</em> 76 (May 1986), pp. 2–3.</p>
Murray N. Rothbard<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/ww_i_1.PNG?itok=3pWIq6Ga" width="240" alt="ww_i_1.PNG" />6165November 9, 2018 - 2:00 PMFront page feed3 Ways Bernie-Care Makes Canadian Healthcare Look Good in Comparisonhttps://mises.org/node/44663
<p>Canadian healthcare has become something of a byword for the "ideal" in healthcare among certain activists in the United States. Bernie Sanders, for example, has relentlessly pressed for a Canada-style healthcare system, and many left-of-center Americans advocate for the same.</p>
<p>Not surprisingly, though, few details of how the Canadian "single-payer" system works are ever discussed in the US. Advocates for single payer tend to assume that there is a simply one big national healthcare apparatus, and that everyone need only show up at a hospital or doctor's office to get everything free. This has never been the case with Canadian health care, but it's clear than many think it is.</p>
<p>One need only <a href="https://berniesanders.com/issues/medicare-for-all/"> look at the Bernie Sanders plan </a> to see how monolithic and extensive their idea of government healthcare, based on the single-payer idea:</p>
<blockquote><p>Bernie’s plan would create a federally administered single-payer health care program. Universal single-payer health care means comprehensive coverage for all Americans. Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments.</p></blockquote>
<p>This vision of federally-mandated health care goes much, much further than Canada's healthcare system. And if implemented, it would be a far larger financial burden to payers of federal taxes than is the case in Canada.</p>
<p>I say this not to advocate for the Canadian system, but to highlight than some government healthcare systems are worse than others. And looking at some of the details of the Canadian system helps to illustrate how the proposed Bernie plan is one of the <em>worst</em> that's been proposed.</p>
<p>There are three main ways that the Canadian plan isn't as bad as the Bernie plan: it's relatively decentralized, it has a limited scope of mandated coverage, and there is more room for a private sector than in many other countries with government healthcare systems.</p>
<p>Interestingly, if one peruses the Canadian left's commentary on the country's healthcare system, the commentary is likely to regard all of these good points as<a href="https://www.theglobeandmail.com/opinion/five-things-canadians-get-wrong-about-the-health-system/article20360452/"> <em>bad</em> things about Canada's healthcare system</a>. They tell us that federal mandates ought to be extended. That the federal government ought to assert more control, and that there is too large a role for the private sector. From a <em>laissez-faire</em> perspective, of course, all of these "shortcomings" of the system actually make it relatively less bad.</p>
<h4>One: It's Decentralized</h4>
<p>As many observers of the Canadian healthcare plan have noted, Canada doesn't have one government healthcare system. It has 13: one for each territory and province. Since the beginning, the Canada Health Act, including its subsequent revised versions, places much of the control over healthcare coverage at the provincial level. In other words, the "<a href="https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=14&cad=rja&uact=8&ved=2ahUKEwif3Z-h-sfeAhViNn0KHeMiB5MQFjANegQIBRAB&url=https%3A%2F%2Fwww.theglobeandmail.com%2Fopinion%2Ffive-things-canadians-get-wrong-about-the-health-system%2Farticle20360452%2F&usg=AOvVaw2etuYChWDMFTQTYtUqUZqW">details of how each system operates, including what is covered and how, is determined provincially</a>."</p>
<p>The federal mandate means that provinces must cover "medically necessary" hospital services and services performed by a doctor. This may sound pretty comprehensive, but what is "medically necessary" is usually defined at the provincial level. Moreover, what is defined as medically necessary can be — and has been — changed to lessen the number of procedures covered by the state. This, in effect, puts that procedure or product into the realm of the private sector.</p>
<p>And there are some big holes in coverage in government healthcare in Canada that may surprise advocates for "socialized medicine" in America. In Canada, patients must rely primarily on private insurance for prescription medications, dental care, physiotherapy, ambulance services, prescription eyeglasses and other procedures deemed to experimental to too costly to be covered by government facilities. Moreover, long-term care is "<a href="http://www.womenandhealthcarereform.ca/publications/banerjee_overviewLTC.pdf">practically invisible at the federal level</a>," and, "<a href="https://ccla.org/current-state-mental-health-canada/">the majority of mental health services do not meet the eligibility requirement </a> of 'medically necessary.' Unless received in a hospital, psychological services must be paid for out-of-pocket or covered by private third-party insurance."</p>
<p>All the territories and provinces have <em>added</em> coverage beyond the federal mandates, of course, but they remain free to undo these policies as well. After all, expanded coverage puts a burden on local budgets. And provincial governments have neither the ability to print money or — thanks to the realities of tax competition — raise taxes endlessly.</p>
<h4>Two: A Limited Scope of the Federal Act Allows for Ways to Control Costs</h4>
<p>Needless to say, the fact prescription drugs, mental health services, and long-term care are not covered by federal mandate would be considered scandalous by the authors of the Bernie Sanders plan. <em>They</em> demand that everything from an annual eye exam to a physical-therapy session be covered by US taxpayers right down to the last dime.</p>
<p>The Canadian left has criticized their own system for this limited scope, too, with occasional calls for new reforms to expand federally-mandated coverage. But, so far, this has not happened.</p>
<p>Part of the reason it hasn't happened is that provinces and the federal government are, in fact, limited by the realities of government budgets. While many Americans perceive government spending to be an utterly limitless and non-scarce resource, other countries such as Canada don't live in a world where new money can be endlessly created so long as the money remains the world's reserve currency. The Canadian dollar, of course, <em>isn't </em>the world's reserve currency and massive government deficits do present an actual problem for the Canadian state. Thus, medical procedures are sometimes declared not medically necessary, and prescription drugs — a potentially huge burden on government budgets — have never received received blanket coverage.</p>
<p>This version of "universal" healthcare falls far short of what Bernie Sanders and his supporters imagine, but it's also the reason that Canada is not on the brink of a sovereign debt crisis, or burdened by massive debt payments, as in the US and much of Western Europe.</p>
<h4>Three: There Is at Least <em>Some</em> Room for a Private Sector</h4>
<p>The limited nature of mandatory coverage allows for some breathing room for a private sector — in drugs, in mental health, and in whatever is not deemed medically necessary. In Canada, nearly<a href="https://mises.org/wire/half-health-spending-us-now-government-spending"> one-third of healthcare transactions are financed by private sources</a>, which is higher than most countries with "universal" health systems.</p>
<p>Unfortunately, there <em>are</em> draconian limits on what the private sector can offer if the procedure is indeed listed as necessary. This means the private sector can't simply set up shop offering parallel hospitals or even basic diagnostic services. Part of the rationale for this has been political, because it is believed that the mere availability of parallel private medical services is "unfair." Another rationale is economic: policymakers fear all doctors would flock to the private sector, thus driving up the price of doctors for the "public" hospitals. As Canadian historian <a href="https://mises.org/library/canadian-medicare-model-united-states">Ronald Hamowy notes</a>, there has thus been opposition to allowing even small clinics performing diagnostic services like MRI scans. This, it was argued, would allow rich people to "jump the queue."</p>
<p>It is not a surprise, of course, that the size and speed of "the queue" is an issue in a healthcare system where wait times for a wide variety of treatments <a href="https://www.fraserinstitute.org/studies/waiting-your-turn-wait-times-for-health-care-in-canada-2017">can frequently total 20 weeks (or more)</a>. This is a direct result of the prohibition on parallel private services. <a href="https://mises.org/wire/laura-hillier-rip"> Some people die waiting for their medically necessary services, </a>which is why some governments, <a href="https://www.nytimes.com/interactive/2017/09/18/upshot/best-health-care-system-country-bracket.html">such as Australia</a>, have attempted to increase access by allowing parallel private insurance. And its why some Canadians are now <a href="https://globalnews.ca/video/4456586/is-canada-ready-for-a-two-tier-healthcare-system">suggesting a two-tier system in healthcare</a>.</p>
<p>The prohibitions on market care, after all, are what makes a healthcare system "single payer." It means there can only be a single payer (the government) for certain services — primarily so that government policymakers can have total control over pricing.</p>
<p>In this respect, though, the Canadian system is "single payer" only in cases of what is deemed "medically necessary." Everything else becomes a part of a multi-payer system, either public or private.</p>
<p>Things would hardly improve though, if Canadian coverage were<em> </em>to move in the direction of the Bernie Sanders plan. On the contrary, flexibility would be greatly diminished and consumers would have <em>fewer</em> choices. As the Sanders plan is far more extreme than the Canadian plan in terms of making itself a strictly single-payer system, nearly <em>all </em>medical services under the plan would be allowed <em>only</em> within the public sector, and private services in nearly <em>every </em>area of care would become either illegal or very rare.</p>
<p>Naturally, the Bernie plan doesn't <em>say</em> this is the outcome of their plan. But it's a likely outcome.</p>
Ryan McMaken<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/bernie1.PNG?itok=QB9sAE9x" width="240" alt="bernie1.PNG" />44663November 9, 2018 - 11:30 AMFront page feedJeff Deist on "The Show"https://mises.org/node/44659
<p>The legacy media doesn't report news, it produces a show. "The Show" lies to us, divides us, inflames the culture wars, and creates political division. The old broadcast networks, cable channels, newspapers, and magazines all actively work against liberty and correct economics—so the importance of alternative sources for news, economics, history, and politics has never been greater.</p>
<p>Jeff Deist spoke on the topic of new and old media at our recent event in Texas.</p>
Jeff Deist<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/20180810_Deist_Node_750x516.jpg?itok=SPPZAa54" width="240" alt="Mises Weekends with Jeff Deist" title="Mises Weekends with Jeff Deist" />44659November 9, 2018 - 11:15 AMFront page feedEuropean Central Bank In Panic Mode as Economy Stallshttps://mises.org/node/44631
<p>The eurozone could not borrow from the momentum of the U.S. economy in the third quarter as economic growth slumped to a tepid <a href="https://ec.europa.eu/eurostat/documents/2995521/9350040/2-30102018-AP-EN.pdf/1420dd25-a69f-4489-a684-76fab0bdba6f"> 0.2% </a> , the slowest rate in more than four years. With the 19-nation currency bloc beginning to stagnate, and the heavyweights failing to post significant gains, Brussels is in panic mode, likely leaning on the European Central Bank (ECB) for further stimulus.</p>
<p>Economists originally anticipated growth of 0.4%. But global trade woes, tumbling business confidence, Italian distress, and the gradual dissipation of an accommodative monetary policy all contributed to the poor numbers in the July-September period.</p>
<p>Italy fell into stagnation, failing to record any growth. Rome has been contending with a debt crisis, sending the yield (interest rates) on government bond prices higher. Officials are embroiled in a contentious battle with the EU because their borrowing plans violate the trade bloc’s rules. There is now talk of a Keynesian-style fiscal stimulus to rev up the national economy.</p>
<p>France, which endured a terrible first half, reported a 0.4% increase, lower than the market forecast of 0.5%. The economy gained on surging business investment, household consumption, and net trade. While the figures are commendable, French Finance Minister Bruno Le Maire did not help matters when he <a href="https://www.politico.eu/article/french-minister-eurozone-not-prepared-for-new-crisis/" rel="noopener" target="_blank"> suggested </a> that the eurozone is not prepared to contain a new financial crisis, adding that “it is in no one’s interest that Italy be in difficulty.”</p>
<p>Germany, the economic engine of the eurozone, will not publish its Q3 numbers until mid-November. But the Bundesbank has warned that growth might have flat-lined in the previous quarter. Researchers do <a href="https://www.wsj.com/articles/eurozone-economic-growth-falls-further-behind-u-s-1540894480" rel="noopener" target="_blank"> predict </a> a recovery for Berlin in the final quarter of 2018, driven by a resurgence in the automobile sector and falling unemployment.</p>
<p>The data sent the euro plunging to an intraday low against the greenback.</p>
<h4> What Happened?</h4>
<p>There were some bullish spots in the Eurostat report, but it was primarily bearish. What happened?</p>
<p>The Royal Bank of Canada (RBC) placed the blame on Germany’s lackluster manufacturing for dragging down the economy. But Chinese demand, which was up nearly 20% last year, has cooled to just 3% this year, causing many businesses to fear that the U.S.-China trade spat is creating a ripple effect.</p>
<p>Figures also pointed out that industrial output declined, with overseas sales taking a hit.</p>
<p>Some are eyeing Italy as a key scapegoat because not only is the country embroiled in a debt crisis but its manufacturing sector is about one-fifth smaller than it was in 2008. But some analysts say that these trends are affecting global financial markets more than the main street economy – for now.</p>
<p>With the ECB on the cusp of raising interest rates, at a time when governments plan to increase spending and slash taxes, there are concerns that debt levels will spike in the coming months. This might impact spending by consumers and companies; a European Commission survey <a href="https://www.reuters.com/article/us-eurozone-economy/mood-sours-as-euro-zone-economic-growth-slows-while-italy-stagnates-idUSKCN1N417G" rel="noopener" target="_blank"> found </a> that business and consumer confidence dipped to its weakest level in more than a year in Q3.</p>
<h4>ECB Out of Bullets</h4>
<p>The Centre for Economics and Business Research (CEBR) says that the risk of a global recession by 2020 has <a href="https://cebr.com/reports/risk-of-global-recession-in-2019-20-rises-to-one-in-three/" rel="noopener" target="_blank"> jumped </a> from one-fifth in 2017 to one-third this year.</p>
<p>In the immediate aftermath of the last financial crisis, governments and central banks sprang into action. Politicians spent recklessly, and central banks enabled it by adopting low rates.</p>
<p>Since the Great Recession, Mario Draghi and the ECB have tried to <a href="https://www.libertynation.com/20-years-since-france-minted-first-euro-coin/" rel="noopener" target="_blank"> spur </a> growth through quantitative easing (QE), the act of buying government securities from the market to decrease rates and introduce new money into the economy. With record low rates and hundreds of billions of new euros in the market, Keynesians would expect a rallying economy. But growth has been <a href="https://www.libertynation.com/kicking-the-omnipotent-unelected-central-bankers-to-the-curb/" rel="noopener" target="_blank"> subdued</a>.</p>
<p>A recession is inevitable – both in the United States and in Europe. Unlike the last economic contraction, the ECB will be out of bullets, unless it wants to experience rampant inflation and a currency crisis. European nations are deeply in debt, running budget deficits and witnessing putrid results. There isn’t much left for these bloc members to do, except employ pro-market measures, like rolling back aggressive spending efforts, paying off the debt, and cutting taxes.</p>
<p>Draghi and Co. have only exacerbated the eurozone’s problems by adopting easy-money, inflationary policies. Now that it has fired all the big guns to barely achieve 2% quarterly growth, the ECB is out of bullets, unable to do anything more. Governments can only raise the white flag of surrender and propose their own secession from the currency bloc. To save yourself from drowning on this sinking ship, an exit from the eurozone may be the only reasonable solution.</p>
<p><a href="https://www.libertynation.com/europe-in-panic-mode-over-economy-as-u-s-a-soars/"><em>Originally published by Liberty Nation.</em></a></p>
Andrew Moran<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/ecb1.PNG?itok=weZARfQl" width="240" alt="ecb1.PNG" />44631November 9, 2018 - 10:00 AMFront page feedIn Federal Courts, the Worst Rise to the Tophttps://mises.org/node/44658
<p>A New York City federal jury has spoken, and its message is ominous: federal prosecutors are empowered to criminalize actions for which there is no statutory prohibition. To put it another way, the government has pulled criminal charges out of thin air – and journalists are cheering.</p>
<p>The news media outlets are framing this as a “college basketball corruption case,” but that is a misnomer, to put it mildly, which I will explain later. First, <a href="https://www.cbssports.com/college-basketball/news/college-basketball-corruption-trial-aspiring-agent-2-former-adidas-representatives-found-guilty-of-defrauding-schools/"> the news as is being reported on the CBS Sports website </a> :</p>
<blockquote><p>NEW YORK -- All three defendants in the first college basketball corruption trial were found guilty of conspiracy to commit wire fraud on Wednesday.</p>
<p>A jury found James Gatto guilty on all three of his counts and Christian Dawkins and Merl Code were found guilty on both of theirs.</p>
<p>Gatto is a former Adidas employee, Code a former consultant. Dawkins is a former aspiring sports agent. The outcome of the trial stands to have widespread impact on college athletics in the coming months and years, be it in the continued reform of NCAA bylaws or by way of punishments against coaches and/or schools down the road.</p>
<p>The U.S. Attorney's Office in the Southern District of New York successfully argued the trio of men defrauded the University of <a href="https://www.cbssports.com/collegebasketball/teams/page/LVILLE/louisville-cardinals"> Louisville </a> and the University of <a href="https://www.cbssports.com/collegebasketball/teams/page/KANSAS/kansas-jayhawks"> Kansas </a> in the process of helping funnel money – and recruits – to those schools, with the intention of later signing prospects to endorsement deals.</p>
<p>All three were found guilty on wire fraud and specific conspiracy to commit wire fraud against the University of Louisville. Gatto's third guilty count was a conspiracy to commit wire fraud against the University of Kansas.</p></blockquote>
<p>(I add that the Southern District of New York that gave us Rudy Giuliani’s predations in the 1980s, the Martha Stewart non-inside trading case, and the awful Frank Quattrone conviction which later was overturned. Names like Giuliani, James Comey, and Preet Bahara line the wall in the Abusive Prosecutors Hall of Shame.)</p>
<p>The charges sound ominous: wire fraud, conspiracy to commit wire fraud, and defrauding the University of Louisville and the University of Kansas. But when we break down the actual charges and what they mean, a different picture emerges. Before doing that, however, I need to explain how the National College Athletic Association (NCAA) operates.</p>
<p>Despite the fact that the NCAA is a multi-billion dollar enterprise in which many coaches become multi-millionaires, the most important factors of production – the athletes themselves – receive only in-kind payments in the form of tuition and fees, room and board, and books. Given the high cost of a college education, this kind of payment for those fortunate to earn full scholarships (and many collegiate athletes are not on full rides) is not peanuts, but it also is clear that a number of athletes at top-ranked programs create value for the universities that mostly goes into the pockets of others.</p>
<p>With apologies to Karl Marx, we are looking at a form of appropriation of surplus value, although speaking as a former collegiate athlete who was on two NCAA Division-I championship teams, I hardly would think that athletes are exactly the downtrodden Marxian proletariat. That being said, however, if these high-flying sports programs did not bring billions of dollars into the coffers of universities and the NCAA itself, then football and basketball coaches would not be the highest-paid state employees at public universities like the University of Alabama and the highest-paid people on campus at private institutions like Duke University.</p>
<p>According to the NCAA, even though coaches, athletic directors, and many NCAA officials are highly-paid, any payments to the athletes that help make this financial largess possible would <a href="https://www.aspeninstitute.org/blog-posts/history-behind-debate-paying-ncaa-athletes/"> disturb the “aura” of “amateurism” in college sports </a> , as well as “corrupt” the special notion of the “student-athlete.” Furthermore, there is the view by some that the very presence of high-profile athletes and coaches on an august university campus is corrupting in itself.</p>
<p>(The idea that higher education, which has succumbed to political correctness in the extreme, and which has embraced “science” that recognizes only politically-correct outcomes, is “corrupted” by people engage in activity for which results are not fixed simply is laughable. Enough said.)</p>
<p>Thus, we have the situation in which payments to owners of a key resource in a multi-billion-dollar industry are severely limited and distorted by a governing body – and then people are shocked when competition for that key resource spills out in other forms. In most situations where something of value is produced, payments to resource owners are expected; college sports, however, calls such payment a form of corruption, a situation which breeds hypocrisy, cynicism, and outright cheating.</p>
<p>Nick Saban, the hyper-successful football coach at the University of Alabama, pays his players. Urban Meyer of Ohio State pays his players. Kirby Smart of Georgia pays his players, Roy Williams, the basketball coach at the University of North Carolina, pays his players, and so on. All coaches deny the obvious not because they are by nature sleazy liars, but rather because the system demands they lie to protect the academic façade that has become higher education. The system requires that people lie to prop up everything else.</p>
<h4><strong>Enter the Feds</strong></h4>
<p>The entrance of federal prosecutors into this situation is relatively new, as only one time before has a U.S. attorney tried to criminalize the passing of money to grease the recruiting wheels of college sports. That was the 2005 conviction of Logan Young, a booster for the University of Alabama who lived in Memphis, Tennessee.</p>
<p>Federal prosecutors claimed that Young bribed a high school football coach in Memphis to steer a prized recruit to Alabama, and the jury dutifully convicted. <a href="https://www.lewrockwell.com/2005/02/william-l-anderson/police-state-of-america/"> I wrote an article condemning both the charges and the verdict </a> , noting that Young was convicted of “crimes” that by themselves (crossing state lines and withdrawing money from a bank) were not illegal acts and that even the so-called underlying act of bribery actually was not even a federal crime, but rather a state crime and Young had not even been charged in Tennessee with bribery, much less convicted in a court of law. The actual federal charges consisted of what Candice E. Jackson and I have called “ <a href="https://reason.com/archives/2004/04/01/washingtons-biggest-crime-prob"> derivative crimes </a> ,” which are so-called illegal acts that are derived from other “illegal” acts and finally an actual underlying crime.</p>
<p>Take the “crime” of wire fraud, for example. Assume that I have run a financial scam which actually breaks the law, and I use the Internet or the telephone system. The feds can charge me with “wire fraud,” which is nothing more than using the “wires” in the commission of a crime. There is nothing inherently criminal about using a telecommunications system, but it is easier to convict someone of using a computer or the phone lines than it is to convict them of the actual crime of defrauding others. Thus, when one sees that someone is indicted in federal court, it is almost certain that the charge will be either wire fraud or “conspiracy” to commit wire fraud, which is even easier to prove. What one will rarely see is someone convicted of an actual criminal act.</p>
<p>The latest convictions in the so-called corruption scandal fit right into the “derivative” categories I have described. Note that jurors did not actually convict anyone of fraud itself, nor did they go after the athletes that allegedly were paid up-front money. Instead, prosecutors claimed that by funneling money to the recruits and their families, they made those athletes ineligible by NCAA standards, which then “defrauded” the institutions with whom the basketball players had signed, the University of Louisville and University of Kansas, both of which are powerhouse programs with multiple NCAA men’s basketball championships to their credit.</p>
<p>Whether or not we are dealing with criminal fraud is up for debate, since no athlete or agent/booster ever has been convicted in an actual court of law for the crime of defrauding a university. Furthermore, this is the first time that the fraud statutes ever have been used in quite this way. Federal prosecutors made bribery the underlying “crime” when they charged him with withdrawing money from his bank in amounts under $10,000 (to avoid detection by authorities) and crossing state lines. No one ever accused him, however, of defrauding anyone.</p>
<p>The latest convictions are troublesome in that they involved a brand new tactic in the ever-widening interpretation of federal fraud statutes. Prosecutors claimed (successfully, at least for now) that because these people funneled money to prospects <em> allegedly without knowledge of Kansas and Louisville coaches and officials </em> , they made the players ineligible to pay under NCAA rules. Note, however, that it was the players and their families that chose to accept the money, but prosecutors failed to charge any of them even though they were party to the alleged deception.</p>
<p>Not surprisingly, coaches and officials at both universities strongly denied they had any knowledge of the payments, but their positions defy logic. First, and most important, the defendants’ actions were directed at steering these athletes to Kansas and Louisville, and it is highly doubtful that they picked these programs at random. Second, the underground system involving payments to players and families does not operate independently of the coaches. Indeed, the system would make no sense unless coaches were involved.</p>
<p>As for claiming criminal behavior, the NCAA is a private organization and its rules do not have – and <em>should not </em>have – the force of law and especially criminal law. At most, issues like this belong in civil, not criminal courts. An athlete or coach should not be jailed for simply violating an NCAA rule (and the rules are legion and have metastasized as though they were part of the Federal Register, making it nearly impossible for <em>any</em> athletic program to be “clean”). However, in order to criminally <em>defraud</em> a university, an accused person would have to be involved in some sort of relationship with that institution, and that would have to mean that the coaches were in contact with the aspiring agents and representatives, something they already have denied.</p>
<p>In fact, the prospective athletes and their families were the ones that actually received the monetary payments that compromised the players’ NCAA eligibility, and they were the ones in touch with coaches and university officials. They understood that they had been given money the NCAA says they cannot have, so if anyone engaged in fraud, it is they. However, it is much easier to go after aspiring agents and representatives of shoe companies than 18-year-olds and their families, which often are black and poor. The media will cheer when an adult who has offered a teenage athlete money the NCAA says is out-of-bounds is convicted in court and faces years in prison, as opposed to a poor, African-American youth whose only “crime” was having an exceptional ability to play a sport, or maybe his parents.</p>
<p>Not surprisingly, no one in journalism has taken a hard look at the legal ramifications of what federal prosecutors have done. During the 1980s, Rudy Giuliani as the U.S. attorney in Manhattan used the RICO statutes to destroy entire firms, doing billions of dollars of damage, but the media following him was utterly adoring as Rudy did battle against the so-called demons of capitalism. No one asked whether or not it was wise in the long run to use criminal law in a way it never had been used before in order to attain political ends that would result in productive companies lying in ruins and their executives sitting in prison. It served Giuliani’s political aspirations and journalist had their stories, so all was well.</p>
<p>Likewise, we have people facing prison, people who almost certainly had contact with college coaches that now deny ever having knowledge of those contacts. The accused were working in the shadow regions of college sports, a situation created by the NCAA’s arcane “amateur” rules that routinely are broken, and suddenly federal prosecutors have decided that these people are criminals.</p>
<p>This is not going to end well. First, and most important, the NCAA rules guarantee that owners of key resources are going to seek payment outside the official guidelines, which means there is going to be fresh meat for prosecutors as long as those rules exist. Second, the popularity of these verdicts mean that other prosecutors are going to want in on the action, as popular convictions can be a springboard to future political success. (Just ask Rudy Giuliani how the Wall Street prosecutions benefited him even though it caused billions of dollars in economic harm.) We can expect further twisting of federal criminal law to benefit prosecutors.</p>
<p>And, finally, the twisting of the law itself causes untold social harm. When actions that once were not considered to be criminal suddenly are interpreted differently, even though the underlying statutes remain unchanged, it creates legal uncertainty that benefits political animals in the federal criminal justice system. F.A. Hayek noted that in government, the worst among us generally are the ones that make it to the top, and in the world of federal law, we see Hayek’s warnings come true.</p>
William L. Anderson<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/court1.PNG?itok=YzTjU9WT" width="240" alt="court1.PNG" />44658November 9, 2018 - 6:00 AMFront page feedHalf of Health Spending in the US Is Now Government Spendinghttps://mises.org/node/44656
<p>US states continue to expand Medicaid, and it's happening even in so-called "red states." CNBC, for instance, reports how voters in "red states" Utah, Nebraska, and Idaho <a href="https://www.cnbc.com/2018/11/07/utah-idaho-and-nebraska-approve-medicaid-expansion-ballot-measures.html"> all approved ballot issues to expand Medicaid </a> under new Obamacare provisions. Meanwhile, the voters in these states also handed control of state government to Republican governors and legislators.</p>
<p>At the state level at least, the expansion of government healthcare has now become pretty much a given in nearly all states outside of the South.</p>
<p>It continues to be a big issue in state-level elections, such as in Colorado, where the Republican candidate — who lost the election — spent much of his campaign condemning expansion of "government-run" healthcare.</p>
<p>But let's face it. A great many voters, whether Republican or Democrat, want to hear the magic words "safety net" when it comes to health care. This is why even voters in Idaho, voted to — as they saw it — expand the healthcare safety net.</p>
<p>The recent expansions of Medicaid, however, are just the latest step in a quickly expanding government-funded healthcare apparatus that has been growing for decades. Moreover, the government-sector on health is now so large, as to consume half of all healthcare spending in the United States.</p>
<p>Using data from the OECD's 2015 Health Statistics report, we find government spending in the United States accounted for 48% of overall health spending, compared with an OECD average of 73%:</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/health_spending.PNG?itok=35K3iFzl" title="health_spending.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78448-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/health_spending.PNG?itok=fCeztqop" width="693" height="358" alt="health_spending.PNG" title="" /></a></div>
<p><em><a href="http://www.oecd.org/health/health-systems/oecd-health-statistics-2015-country-notes.htm">Source. </a>"OECD Health Statistics 2015 - Country Notes"</em></p>
<p>And that was in 2013. It's a fairly safe bet that with the growing costs of Medicare and Medicaid, government healthcare spending has grown to at least equal private-sector spending.</p>
<p>It's also worth noting, that <em>government-sector</em> spending (mostly Medicaid, Medicare, VA, etc.) alone is similar to or greater than the same measure in most other OECD countries, and is on a par with Germany, Switzerland, Belgium, Austrian, New Zealand, and others.</p>
<p>According to the World Health Organization, per capita government spending on healthcare is the fourth highest in the world:</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/health2_0.jpg?itok=0fdfojIj" title="health2.jpg" class="colorbox" data-colorbox-gallery="gallery-file-78449-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/health2_0.jpg?itok=2HLMeMEt" width="640" height="444" alt="health2_0.jpg" title="" /></a></div>
<p><em><a href="https://mises.org/wire/one-third-americans-are-government-healthcare">Source.</a></em></p>
<p>Needless to say, the idea that the US has a "free market" in health care is <em>pure fantasy</em>. The so-called safety net is huge, expensive, and dominates the industry. With so many Baby Boomers going on Medicare in the near future, and with continued expansion of Medicaid, it won't be many more years before a much larger majority of healthcare spending is done by governments.</p>
<p>This, however, won't mean a fundamental change in the the US healthcare system, but a continuation of an established trend.</p>
<p>I don't say this to <em>advocate </em>for more government spending on health care, but merely to point out that the US has not embarked on any sort of new road it hasn't already been traveling for years.</p>
<h4>You Don't Need a Single-Payer System to Get to Single-Payer Levels of Health Spending</h4>
<p>As it is, the US is moving toward levels of public spending that will rival those of some nations that aren't exactly known for any devotion to "free market" healthcare.</p>
<p>As it is now, government-sector spending in the US is similar to that of Chile (which, by the way, has a slightly higher life expectancy).</p>
<p>Given the growth of Medicare benefit spending has <a href="https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/"> nearly doubled over the past decade</a>, it's not impossible to imagine overall public spending rising to levels we now see in some countries with so-called "socialized" medicine.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/health.PNG?itok=CwTGyQ3o" title="publichealth.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78450-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/health.PNG?itok=RsiPG5TS" width="472" height="648" alt="health.PNG" title="" /></a></div>
<p><em><a href="http://www.oecd.org/health/health-systems/oecd-health-statistics-2015-country-notes.htm">Source. </a>"OECD Health Statistics 2015 - Country Notes"</em></p>
<p>After all, contrary to the widely-held misconception that all healthcare (including prescription drugs) in Canada is "free," nearly 30 percent of all healthcare spending takes place in the private sector — mostly to cover prescription drugs, dental care, and other types of care not covered by the state.</p>
<p>Moreover, healthcare in the US offered by ostensibly private sector firms in the US is done overwhelmingly through heavily regulated and highly bureaucratic insurance schemes.</p>
<p>This sort of insurance is so widespread that fewer Americans purchase health services out-of-pocket than in most other OECD countries. While Swiss, Italian, and Australian out-of-pocket expenses constitute at least one-fifth of health spending, the total is only 12 percent in the US. The US is well below the OECD average of 19.5 percent. The idea that millions of Americans are handing over huge sums of cash out-of-pocket to afford basic medical procedures is fiction.</p>
<div class="media media-element-container media-image_no_caption"><a href="https://mises-media.s3.amazonaws.com/styles/max_1160/s3/ocket.PNG?itok=ksHn2_0N" title="pocket.PNG" class="colorbox" data-colorbox-gallery="gallery-file-78451-A0j8RlP3Bh8" data-cbox-img-attrs="{"title": "", "alt": ""}"><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/ocket.PNG?itok=BIYoYPrz" width="521" height="709" alt="ocket.PNG" title="" /></a></div>
<p><em><a href="http://www.oecd.org/health/health-systems/oecd-health-statistics-2015-country-notes.htm">Source. </a>"OECD Health Statistics 2015 - Country Notes"</em></p>
<p>At this point, the debate isn't over a choice between a market healthcare system or a government healthcare system. We're now just really talking about how <em>much</em> the government sector should grow as a component of all health spending.</p>
<p>Now that the federal government is, by far, the largest single payer for healthcare purchases in the US, we have to openly admit that there is no longer any functioning market pricing system in healthcare. The industry is now dominated by government contracts, government spending, and government regulations on healthcare services.</p>
<p>Of course, prices continue to skyrocket in the US. But this is not because there is too much "market competition," but because healthcare is heavily subsidized by various government interventions. As is always the case, subsidized goods and services experience growing demand as the cost — as perceived by consumers — goes down. This happens everywhere that healthcare is subsidized, but US policymakers, so far, have lacked the stomach for controlling costs by denying care to people, or making them wait in long queues — as is done in other government-controlled healthcare systems.</p>
<p>It would seem that the goal of the free-market reformer in the current climate must be to stop speaking of preventing "socialized medicine" but instead he or she ought to focus on carving out a role for the market in what is clearly a government dominated sector. The discussion is now one of "de-regulation," "flexibility," or "breathing room" for a truly free fee-for-service economy to develop. America now has an enormous "public" healthcare system. The goal now is to carve out some means of escape.</p>
Ryan McMaken<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/scalpel.PNG?itok=FnIGGfYc" width="240" alt="scalpel.PNG" />44656November 8, 2018 - 4:30 PMFront page feedCanadian Medicare as a Model for the United Stateshttps://mises.org/node/14738
<p><a href="https://mises.org/library/mises-u-2011">Recorded at Mises University 2011.</a> Includes an introduction by Joseph T. Salerno. </p>
<p>In this 42-minute talk, Canadian historian and political scientist Ronald Hamowy discusses: a brief history of the Canadian healthcare system; the roots of its popularity among Canadians; how it is financed; the many unseen costs of the system, such as long wait times, a declining number of doctors, fewer hospital beds, and a lack of availability of various diagnostic tools such as PET scans.</p>
Ronald Hamowy<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/canada_0.PNG?itok=obAMRRyA" width="240" alt="canada_0.PNG" />14738November 8, 2018 - 2:00 PMFront page feedInfant Mortality Is a Misleading Statistic for International Comparisonshttps://mises.org/node/44598
<p>There has been a long line of critics of American health care claiming that international comparisons of life expectancy and infant mortality rates provide supposedly irrefutable proof of the need for more government control of our health care system.</p>
<p><em>Los Angeles Times</em> writer Michael Hiltzik recently echoed such assertions to conclude that “the U.S. stinks” in those areas. Unfortunately, though, infant mortality and life expectancy comparisons stink as health care efficiency indicators.</p>
<p>Using infant mortality as a condemnation of American health care not only ignores important differences in what countries count as infant deaths, it ignores many factors unrelated to health care quality that would dramatically change comparisons.</p>
<p>Nonviable babies who die quickly after birth are recorded as live births in the US, but are more likely to be classified as stillbirths in other countries, particularly if they die before birth is legally registered. That biases our infant mortality rate substantially upward compared with others. One study in Philadelphia concluded that the overstatement was 40 percent.</p>
<p>American doctors also go to greater lengths resuscitating very premature babies who are not breathing when they are delivered. This also means that babies at very high risk are counted as live births here, but not in many other countries, increasing our infant mortality rate as well as inflating our costs by increasing neonatal care needs.</p>
<p>Infant mortality also reflects many factors apart from health care provision, including mother’s age, obesity, drug use and other lifestyle factors, as well as babies’ gestational age at birth, all of which worsen American results.</p>
<p>The US has the highest proportion of preterm and low-birth-weight babies, which comprise a large fraction of infant deaths, of any developed country. For example, teenage mothers (nearly three times more common in the US than Canada and seven times more than in Sweden and Japan) are far more likely to have low-birth-weight babies. If the US birth-weight distribution had been the same as for Canada, a study found that, by itself, would lower American infant mortality below Canada's. A study of gestational ages found that if that distribution had been the same in the US as Sweden, it would cut our infant mortality rate one-third, making us equal to France.</p>
<p>Beyond overstated infant mortality measures, US life expectancy numbers are reduced by higher rates of death from violence and accidents in the US than other countries, even though it is not a reflection of the quality of our health care. They occur disproportionately at younger ages, which could largely be controlled for by using life expectancies starting at later ages, but OECD data relies on life expectancy at birth. For example, in 2000, female life expectancy at birth was 1 year higher in the UK and 1.9 years higher in Germany, but beginning at age 65 there was no differential with the UK and only 0.6 years with Germany.</p>
<p>Larger, more diverse countries also tend to have worse life expectancy results than smaller, more homogeneous countries, where communication problems, cultural differences, variance in population characteristics, etc., are far smaller. Further, what works for small, compact populations may not scale to far larger countries. As critics often repeat, the US ranks down the list in life expectancy, but what they never mention is that no country more populous than the US ranks higher. In fact, you could add up the populations of half of the countries in the top 10 of life expectancy in 2012 (e.g., Iceland, Monaco, and Andorra) without totaling California’s population.</p>
<p>The US is also very ethnically diverse (including more whites and more Hispanics than any other country, and with the 9<sup>th</sup> most black residents) compared to other countries. If we excluded blacks, who have far lower life expectancies both here and elsewhere, from the data, more closely representing the greater ethnic representation here, life expectancy would roughly equal the EU average. And perhaps most importantly, as Scott Ehrlich reported last year, while our “official” life expectancies lag many other countries, “on average, there is nowhere you will live longer in the world as someone of Asian, Hispanic, or African descent, than in the United States.”</p>
<p>Critics constantly use infant mortality and life expectancy comparisons as weapons to attack the US as offering inferior health care and push for ever-more government control. However, reported infant mortality and life expectancy data does not demonstrate that “the U.S. stinks” in health care provision, because they involve simplistic comparisons of inconsistent measures, which omit many important determinants. And while American health care here is an incredibly heavily regulated industry, whose resulting deviations from freely-made market arrangements cause real problems that need to be reformed by reducing rather than increasing government’s heavy hand, the supposedly “slam dunk” evidence critics constantly repeat provides no more proof of their claims than a higher than average death rate in an elite hospital that takes the riskiest patients proves it is a low-quality hospital.</p>
Gary Galles<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/neonatal1.PNG?itok=yQnVu0M7" width="240" alt="neonatal1.PNG" />44598November 8, 2018 - 11:00 AMFront page feedNo Matter How You Vote, Politicians Don't Represent Youhttps://mises.org/node/44649
<p>We're often told that submission to government edicts is "voluntary" because we have "representative" government. The evidence suggests, however, that politicians don't represent their constituents. Nor could they, even if they wanted to.</p>
<p>Original article: <a href="https://mises.org/wire/no-matter-how-you-vote-politicians-dont-represent-you" target="_blank">"</a><a href="https://mises.org/wire/no-matter-how-you-vote-politicians-dont-represent-you">No Matter How You Vote, Politicians Don't Represent You"</a>.</p>
Ryan McMaken<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/RadioRothbard_750x516_20180222_0.jpg?itok=ygeJvFvq" width="240" alt="Radio Rothbard" title="Radio Rothbard" />44649November 8, 2018 - 9:45 AMFront page feedHow Capitalists Created a "War on Waste"https://mises.org/node/44600
<p>Perhaps the most commonly referenced historical image invoked by people who wish to demonstrate the need for government interventions to protect the environment from private industry is that of the Chicago River in the nineteenth century. By the end of the Civil War, Chicago had the largest stock yard in the country, the Union Stock Yard, where hogs and cattle were butchered, portioned into marketable cuts of meat, packaged, and distributed to the rest of the country for sale. But much of the animal was unusable, so each slaughtered animal had wasteful byproduct that businesses had to deal with. Their initial answer was to dump the waste into the Chicago River, leading to the infamous descriptions of the stench of death and the bubbling water left by visitors to the city.</p>
<p>Truly, this was an ecological disaster by any standards, as a river that connected to a number of other waterways became fouled with animal byproduct, manure, and human sewage. As early as the 1850s, citizens of Chicago were concerned with the effect that the contaminated river might have on their health. It was a reasonable concern, and one that deserves serious consideration as to how these problems are overcome.</p>
<p>Of course, many theorists have already offered reasonable solutions grounded in economic theory and historical precedent. Walter Block has written <a href="https://mises.org/library/water-capitalism-case-privatizing-oceans-rivers-lakes-and-aquifers"> an entire book making the case for the privatization of waterways</a>, which would allow private prohibitions of dumping (which, in the case of the Chicago River, is merely an example of the “commons problem”). By privatizing waterways, the property owners have a personal incentive to maintaining their property and a right to prevent people from polluting it. <a href="https://mises.org/wire/are-libertarians-too-anti-pollution"> Ryan McMaken has pointed out </a> that the centralization of the court system has created a legal environment in which government regulations actually occlude the ability to bring suit against polluters. If somebody tried to sue a company for polluting upriver, while they live downriver, government regulations actually <em>protect</em> the polluter from liability as long as they are only polluting up to the legally stipulated amount.</p>
<p>These are all important ideas to be familiar with, but equally important is the simpler understanding of how capitalism — without any direct, institutionalized incentive (private or governmental) — creates a disincentive to pollute in the first place. It is true, as critics will point out, that the “profit motive” cultivates an incentive to dump wasteful byproduct into common or unowned property. But it is also true, yet almost never acknowledged, that the same profit motive encourages the natural reduction of waste, even without any of the above-mentioned institutional reforms.</p>
<p>In 1871, the city of Chicago tried to solve the pollution problem by hiring engineers to actually divert the flow of the waterways so that the waste would be sent into the Illinois River, rather than Lake Michigan. Not only was this a costly (and not very effective) endeavor, but it was also hardly an environmentally friendly solution from the government. By contrast, the businesses that were dumping the waste began looking for solutions to make the byproducts into marketable commodities. If they could sell it, they would no longer have to dispose of it.</p>
<p>As historian William Cronon notes, “if any single factor was more important than refrigeration in accounting for the [meat packers’] success, it was their tireless efforts to use every single part of the animals they dismembered. Chicagoans made the boast so frequently that it became a cliché: the packers used everything in the hog except the squeal.” He goes on to write that “the packers worshipped at the altar of efficiency, seeking to conserve economic resources by making a war on waste.”<a class="see-footnote" id="footnoteref1_90usspl" title="William Cronon, Nature’s Metropolis: Chicago and the Great West (New York: W.W. Norton & Company, 1991), 249." href="#footnote1_90usspl">1</a></p>
<p>Echoing Adam Smith’s famous observation that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest,” the “war on waste” that Cronon refers to was never a product of environmental philanthropy. It was the desire to make more money. But irrespective of the intentions, the consequence was a drastic reduction in pollution.</p>
<p>Leading the way in the war on waste was Philip Armour, who made an observation at the end of the nineteenth century: “There was a time when many parts of the cattle were wasted, and the health of the city injured by the refuse. Now, by adopting the best known methods, nothing is wasted, and buttons, fertilizer, glue, and other things are made cheaper and better for the world in general out of material that was before a waste and a menace.”<a class="see-footnote" id="footnoteref2_uod7f5t" title="Frank W Gunsaulus, “Philip D. Armour: A Character Sketch,” North American Monthly Review of Reviews 23 (1901): 172." href="#footnote2_uod7f5t">2</a> The desire to find a use for waste products fueled innovation — sometimes as simple as using scraps of meat unfit for human consumption to fatten pigs, which Cronon refers to as “an early form of recycling in which pig flesh people were unwilling to eat was reconverted into pig flesh they were willing to eat.”<a class="see-footnote" id="footnoteref3_3d5yonk" title="Cronon, Nature’s Metropolis: Chicago and the Great West, 249." href="#footnote3_3d5yonk">3</a></p>
<p>As the push for new ways to utilize waste were successful, products like soap and candles were joined by brushes, strings, pepsin, and even canned food, such as pork and beans, which used scraps of meat that had previously gone to waste. In contrast to the descriptions of the bubbling river that historians enjoy pointing to, one visitor to the Chicago World Fair in 1893 described the way plants made use of every part of an animal:</p>
<blockquote><p>Everything — without particularizing too closely — every single thing that appertains to a slaughtered beef is sold and put to use. The horns become the horn of commerce; the straight lengths of leg bone go to the cutlery-makers and others; the entrails become sausage-casings; their contents make fertilizing material; the livers, hearts, tongues, and tails, and the stomachs, that become tripe, all are sold over the butchers’ counters of the nation; the knuckle-bones are ground up into bone-meal for various uses; the blood is dried and sold as a powder for commercial purposes; the bladders are dried and sold to druggists, tobacconists, and others; the fat goes into oleomargarine, and from the hoofs and feet and other parts come glue and oil and fertilizing ingredients.<a class="see-footnote" id="footnoteref4_qy2hfw4" title="Julian Ralph, Harper’s Chicago and the World’s Fair (1893), 78-79." href="#footnote4_qy2hfw4">4</a></p></blockquote>
<p>These kinds of waste-reducing innovations, fueled by the desire for profit, were not unique to the meat industry, of course. Andrew Carnegie famously sent employees to root through the garbage of his competitors to retrieve the steel shavings — known as “scale” — that they had swept off their floor and tossed out. He would then have it melted down and sold.</p>
<p>John D. Rockefeller hired chemists to take the wasteful byproduct of oil refineries — crude — and find some use for it. They not only came up with more than three hundred marketable products that could be produced with crude, such as paint and varnish, but the entire endeavor eliminated the incentive to dump oil waste, another infamous example of private pollution from the nineteenth century.</p>
<p>People frequently point to automobiles as a source of man-made pollution, but they rarely have the historical perspective to know that the advent of the automobile solved the long-standing problem of manure and horse carcasses polluting streets and waterways in every major city.</p>
<p>Even landfills, which environmental demagogues point to while giving ominous warnings about the unsustainability of human consumption, have been harnessed into providing an environmentally friendly energy source, which is so comparatively efficient that the paragon of recycling, Sweden, <a href="http://www.nydailynews.com/news/world/sweden-imports-trash-norway-heat-electricity-article-1.1192661"> has resorted to <em>paying</em> Norway for hundreds of thousands of tons of its garbage every year </a> .</p>
<p>But as we acknowledge the environmental benefits of profit-oriented entrepreneurship, it is worth also noting how the reduction of waste did not just raise the profits of the industrialists. It also reduced the cost of consumer products, and the “war on waste” turned unprofitable lines of production into profitable ones. One record of Philip Armour’s account books shows that his cost of purchasing, processing, and transporting a supply of cattle was $48.38, but the revenue he received from selling the meat was only $38.17 — leaving him with a <em>loss</em> of $10.21. The line item for the sale of cowhides brought him an additional $6.30. But since all businesses operate on the margins, it was the “Sale of by-products” — bringing in the final $4.50 of revenue — that brought him from the red to the black. His “Net profit from all transactions” was calculated as only $0.59 — razor-thin profits.<a class="see-footnote" id="footnoteref5_b7n069r" title="Cronon, 259." href="#footnote5_b7n069r">5</a> Without the innovations that found uses for wasteful byproduct, customers would have had to pay more for meat and hides.</p>
<p>You don’t have to be a member of the Progressive Left to care about the environment and be concerned with pollution. The citizens of Chicago in the antebellum decade had legitimate reasons to be concerned with the health effects of the polluted river. But while the government sought to solve this problem by spending enormous amounts of taxpayer dollars to hire engineers to merely <em>divert </em>the pollution out of the city, private entrepreneurs actually solved the problem by finding ways to turn garbage into something people were willing to pay for. In so doing, not only did they help the environment, but they made consumer items more affordable to working-class citizens.</p>
<ul class="footnotes"><li class="footnote" id="footnote1_90usspl"><a class="footnote-label" href="#footnoteref1_90usspl">1.</a> William Cronon, <em>Nature’s Metropolis: Chicago and the Great West</em> (New York: W.W. Norton & Company, 1991), 249.</li>
<li class="footnote" id="footnote2_uod7f5t"><a class="footnote-label" href="#footnoteref2_uod7f5t">2.</a> Frank W Gunsaulus, “Philip D. Armour: A Character Sketch,” <em>North American Monthly Review of Reviews</em> 23 (1901): 172.</li>
<li class="footnote" id="footnote3_3d5yonk"><a class="footnote-label" href="#footnoteref3_3d5yonk">3.</a> Cronon, <em>Nature’s Metropolis: Chicago and the Great West</em>, 249.</li>
<li class="footnote" id="footnote4_qy2hfw4"><a class="footnote-label" href="#footnoteref4_qy2hfw4">4.</a> Julian Ralph, <em>Harper’s Chicago and the World’s Fair </em> (1893), 78-79.</li>
<li class="footnote" id="footnote5_b7n069r"><a class="footnote-label" href="#footnoteref5_b7n069r">5.</a> Cronon, 259.</li>
</ul>Chris Calton<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/dump1.PNG?itok=hTcYzUuv" width="240" alt="dump1.PNG" />44600November 8, 2018 - 6:00 AMFront page feedRothbard A to Zhttps://mises.org/node/44407
<p>Are you a Murray Rothbard fan? Do you love his writing? His clarity and style? His razor-sharp economic analysis? His penchant for slaying sacred cows?</p>
<p>Then you’ll want to be part of our exciting new project — but we need your help to make it happen.</p>
<p>The Mises Institute hopes to publish an epic Murray Rothbard compendium, tentatively titled <em>Rothbard A to Z</em>. It will be the ultimate Rothbard reference book, and your single source for his best excerpts and quotes on all the core subjects: his full range of economics, of course, but also philosophy, epistemology, ethics, history, law, and libertarianism.</p>
<p>As a Rothbard aficionado, you already know Rothbard wrote about <em>everything</em>. His 62-page bibliography spans nearly half a century, from 1949 to 1995. He wrote 30 full-length books. He contributed 100 full chapters for edited works. And he authored more than 1,000 scholarly and popular articles.</p>
<p>Prolific and radical hardly begin to describe him — but his important work has never been brought together like this.</p>
<p>This is the Rothbard reference book the world needs. It will combine all his diverse subjects and sources together in one easy to search encyclopedia. Consider it the index to his career, both a reference guide and a fun book you can open at random for the best “Murrayisms” on any topic!</p>
<p>If you’re like me, you probably own several Rothbard books. Ever find yourself searching for that one great quote or sentence, trying to remember where to find it? Looking at dog-eared pages and underlined passages? Can’t find that great line of his on Romanticism or monopoly or Keynes or Say’s Law? You know you read it somewhere, but with the sheer volume of Murray’s output wouldn’t a single reference leading you to the original source be great? </p>
<p>That’s why an alphabetical encyclopedia is so important. I remember as a young man buying a copy of <em>The Ayn Rand Lexicon: Objectivism from A to Z</em>. I never became an Objectivist, but it was a great resource for Rand’s statements and core principles. I still have it to this day.</p>
<p>Rothbard’s systematic thought needs a similar guide. This massive book will clock in at over 500 pages, a daunting task to edit. Fortunately we have Edward W. Fuller and our own David Gordon on the job, bringing it all together. And they’ve included some fun and rare material you’re unlikely to have in your collection, from sources like the <em>Libertarian Forum</em>, Murray’s memos written for the Volker Fund, and his little-known essays like <em>Science, Technology, and Government</em>.</p>
<p>Here are just a few teasers from what they’ve compiled so far:</p>
<ul><li>Deflation, far from being a catastrophe, is the hallmark of sound and dynamic economic growth.<br /> Deflation — <em>Making Economic Sense</em>, p. 16<br /> </li><li>...throughout history, despots and ruling elites of States have had far more need of the services of intellectuals than have peaceful citizens in a free society. For States have always needed opinion-moulding intellectuals to con the public into believing that its rule is wise, good, and inevitable; into believing that the “emperor has clothes.”<br /> Intellectuals — <em>For a New Liberty</em>, p. 14<br /> </li><li>Integration cannot be achieved by law and coercion; it must first come willingly into the hearts of men.<br /> Racism — <em>Left and Right</em>, p. 491<br /> </li><li>Professor Mises has keenly pointed out the paradox of interventionists who insist that consumers are too ignorant or incompetent to buy products intelligently, while at the same time proclaiming the virtues of democracy, where the same people vote for or against politicians whom they do not know and on policies which they scarcely understand. To put it another way, the partisans of intervention assume that individuals are not competent to run their own affairs or to hire experts to advise them, but also assume that these same individuals are competent to vote for these experts at the ballot box.<br /> Democracy — <em>Man, Economy, and State</em>, p. 886<br /> </li><li>Secession is a crucial part of the libertarian philosophy: that every state be allowed to secede from the nation, every sub-state from the state, every neighborhood from the city, and logically, every individual or group from the neighborhood.<br /> Secession — <em>Libertarian Forum v. 1</em>, p. 17<br /> </li></ul><p>This project promises to be an important addition to our mission of promoting real economics and real liberalism, using Rothbard’s uncompromising words — brought together as never before. The result will be worthwhile both for deep Rothbard fans and those just being introduced to him.</p>
<p>We’d love to have this book ready before Christmas, and we’d love to have your name on it. Consider a listing in memory of someone special, in honor of your children, or even an important mentor in your life. Imagine the Rothbard fan in your life seeing their name in this landmark work!</p>
<p><strong><a href="http://mises.org/giving/campaigns/help-publish-rothbard-z-0">All donors of $500 or more will be prominently listed in the book. <span style="color:rgb(73,78,84);font-family:myriad-pro,"Helvetica Neue",Helvetica,Arial,sans-serif;font-size:15px">But any amount will help bring this important book to the public, and we welcome your support at any level.</span></a></strong></p>
<p><a href="https://mises.org/giving/campaigns/help-publish-rothbard-z-0" target="_blank">Please donate today.</a></p>
<div class="media media-element-container media-image_no_caption media-wysiwyg-align-center"><a href='https://mises.org/giving/campaigns/help-publish-rothbard-z-0'><img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/max_full/s3/Donate%20Button%2020181107_250.png?itok=Fqs5L5pm" width="250" height="55" alt="DONATE TODAY!" /></a></div>
Jeff Deist<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/Rothbard_AtoZ_20181107_0.jpg?itok=lurWNan1" width="240" alt="Rothbard A to Z" title="Rothbard A to Z" />44407November 8, 2018 - 5:00 AMFront page feedEconomics as a Vocationhttps://mises.org/node/19473
<h3>The Free Market 26, no. 1 (January 2005)</h3>
<p>Should economics be pursued as a profession or a vocation? The choice isn’t about the job title of a particular economist or what tasks he or she fulfills in the course of a day’s work. It is about the motivation behind the work and the subjective orientation one brings to the task. The choice tends to dictate whether an economist will serve the cause of truth and freedom, or waste his or her talents on convenience, ephemera, and statism.</p>
<p>Think about the word "vocation" as a work or function to which a person is called that requires dedication to an idea. A vocation involves what Ludwig von Mises called "introversive" labor while a profession involves "extroversive" labor. The essence of introversive labor is work undertaken solely for its own sake and not as a means to a more remote end. Extroversive labor, in contrast, is performed because the individual "prefers the proceeds he can earn by working to the disutility of labor and the pleasure of leisure."</p>
<p>One of the "two most conspicuous examples" of introversive labor, according to Mises, is "the search for truth and knowledge pursued for its own sake and not as a means of improving one’s own efficiency and skill in the performance of other kinds of labor aiming at other ends." The second is "genuine sport, practiced without any design for reward and social success."</p>
<p>It is not that the effort expended by the "truth seeker" or "mountain climber" does not involve the disutility of labor, rather "it is precisely overcoming the disutility of labor that satisfies him." Thus genuine truth seeking in any scientific discipline qualifies economically as "consumption" and its pursuit as a vocation.</p>
<p>The founding members of the Austrian School pursued economic research neither for pecuniary gain nor because they sought professional recognition or an influence on public policy. According to Mises, "When Menger, Böhm-Bawerk and Wieser began their scientific careers . . . [t]hey considered it as their vocation to put economic theory on a sound basis and they dedicated themselves entirely to this cause." These three eminent Austrians, therefore, were not economists by profession but by vocation.</p>
<p>The "vocational" economist takes a position in academia or works in some other profession such as banking, journalism, industry, or government in order to obtain the concrete means necessary to sustain and complement his efforts to discover new truths or expound and apply established truths in his economic research and writing.</p>
<p>Now consider the contrast with the "professional" economist. He or she aims at earning a livelihood, eliciting acclaim from peers, achieving public fame, shaping political policies or, most likely, a combination of these ends.</p>
<p>Thus the difference between the vocational economist and the professional economist is not their objective method of earning a living but the subjective ends aimed at, which are unobservable. Nonetheless, despite the subjective element involved, the two kinds of economists can be readily distinguished from each other by scrutinizing the disparate views they express toward economic research, particularly its truth content and perceived rewards.</p>
<p>Vocational economists like Murray Rothbard are not allergic to using the unfashionable terms "truth" and "law" when characterizing the science of economics. For Rothbard economics is a substantive body of immutable and universal causal laws that are logically deduced from the incontrovertible fact that people employ means to attain their most desired ends. As such, Rothbard held that "all these elaborated laws [of economics] are absolutely true" and that "economics does furnish . . . existential laws." </p>
<p>Furthermore, in the 1950s and 1960s, Rothbard was working on Austrian economics in obscurity and virtual isolation. He did not obtain a full-time academic position until 1966 and, before then, was earning a precarious living on foundation grants while he soldiered on in building up the Austrian theoretical edifice. Yet Rothbard revealed in an interview in 1990 that he had been quite content during this period: "Any chance to write a book or meet new people was terrific."</p>
<p>These are the views and the attitudes of the ideal vocational economist.</p>
<p> </p>
<p><strong><em>The Problem of the Professional</em></strong></p>
<p>Paul Samuelson is the exemplar of the modern professional economist. When Samuelson once grandiosely declared, "I can claim in talking about modern economics I am talking about me," he spoke truer than he knew. In his approach to economic research Samuelson is a self-proclaimed follower of the "views of Ernst Mach and the crude logical positivists."</p>
<p>Samuelson’s formulation of the now discredited stable Philip’s Curve tradeoff between inflation and unemployment is an example of such Machian theorizing in action. Without doubt, the Philips Curve for a time was well liked by Samuelson, but its truth content in the face of the stagflation that developed in the 1970s was exactly nil.</p>
<p>Ultimately, however, the professional economist need not fret overly much about whether he can harvest a grain of truth from such unrealistic models, because his reward for pursuing economic research lies elsewhere. According to Samuelson, "In the long run the economic scholar works for the only coin worth having—our own applause." </p>
<p>Samuelson’s account of the extroversive reward sought after by modern professional economists clearly—though perhaps unwittingly—reveals that their research endeavors are not governed primarily by a search for truth. </p>
<p> </p>
<p><strong><em>Why We Must Choose</em></strong></p>
<p>The professionalization of a scientific discipline, particularly a social science like economics, almost always proceeds hand in hand with the expansion of government interventionism.</p>
<p>As Mises put it "The development of a profession of economists is an offshoot of interventionism." The reason for this inevitable connection rests on two facts. On the one hand, the State requires a class of intellectuals and specialists for designing, implementing, and providing rationalizations for various interventions into the market economy. On the other hand, those intellectuals who seek the regular income and prestige that accompany the professionalization of their discipline are ever ready to oblige, because the ability of an intellectual to earn his living researching and writing in his chosen field on the free market is always precarious at best.</p>
<p>As the interventionist State expands, it reinforces the need for trained experts and the university system obtains increasing subsidies from government to initiate and expand graduate programs that will provide such personnel. The lucrative positions in these programs are naturally bestowed on those economists who spearhead the drive to professionalize and are, therefore, most active and outspoken in their support of government interventionism.</p>
<p>In the US, the most extreme and thoroughgoing instances of domestic interventionism occurred during the two World Wars of the twentieth century. It was therefore no surprise that the movement to professionalize American economics, which began in the 1880s, experienced quantum leaps during these war crises. For when the State goes to war it needs professional expertise to plan and direct the massive mobilization of the resources it requires. This translates into a cornucopia of lucrative and prestigious jobs for economic experts and specialists in the bureaus and advisory boards of the political planning apparatus that centrally directs the war economy.</p>
<p>The remarkable proliferation of hyper-specialized fields that occurred during and after World War II led to a disintegration of economic theory, signified by the disappearance of the general economic treatise. No longer was there an integrated system of general economic principles that was held in common and applied to the analysis of all policies and problems by those who called themselves economists. Now each sub-field of research had its own special theory which was more or less sealed off from general economic theory. Even general theory itself was now compartmentalized into microeconomics and macroeconomics.</p>
<p>To sum up: the vocational economist strives to master the system of economic theory as handed down by the great system builders and innovators of the past. Once this mastery is achieved, then, depending on his ability, he is poised either to expound and apply this theoretical system, to contribute a few important innovations, or to present a thoroughgoing reformulation that embodies a number of major advances.</p>
<p>There are very few individuals who are capable of successfully embarking on even the first of these paths. Moreover, regardless of which path is taken, the vocational economist is driven forward by a thirst for truth which is never slaked. He seeks to know ever more about what Rothbard termed "the structure of reality as embodied in economic law." </p>
<p>As Mises perceptively noted as early as 1949, professional economists "rival the legal profession in the supreme conduct of political affairs. The eminent role they play is one of the most characteristic features of our age of interventionism." </p>
<p> </p>
<p><em>Joseph T. Salerno teaches at Pace University, is senior scholar at the Mises Institute, and editor of the </em>Quarterly Journal of Austrian Economics<em>. This is revised and excerpted from the Ludwig von Mises Lecture, Austrian Student Scholars Conference, Grove City College, Grove City, Pa., November 5–6, 2004 (jsale@earthlink.net).</em></p>
<p> </p>
Joseph T. Salerno<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/gears1.PNG?itok=xJH0vH9o" width="240" alt="gears1.PNG" />19473November 7, 2018 - 2:00 PMFront page feedHow So Many Bad Ideas Manage to Win on Election Dayhttps://mises.org/node/44626
<p>Every other year, the run-up to election day reminds me of an irony about the “wonders of democracy” rhetoric that peaks then--that is also when the misrepresentations poured into voters’ ears, undermining the likelihood of achieving those wonders, also peak.</p>
<p>The reason is well-captured by a quote from Jonathan Swift, in 1710: “Falsehood flies, and the truth comes limping after it.” At the last minute, lies, damned lies and statistics, not to mention unsupported claims, rumors, innuendo, etc., can have their greatest power, because there is not time for serious thought, research, and effective rebuttal before voters must cast what will therefore be far more misinformed ballots.</p>
<p>What struck me most as an example this year was “<a href="http://enewspaper.latimes.comn/desktop/latimes/default.aspx?pubid=50435180-e58e-48b5-8e0c-236bf740270e" target="_blank">Rent control could spur more building</a>,” by Gary Painter, in the <em>Los Angeles Times</em> (10/31). It was written in favor of California’s Proposition 10, which would have re-enabled majority-renter communities to vote themselves large benefits from others’ pockets by imposing new rent control laws (currently banned by state law).</p>
<p>While many studies have shown that rent control reduces construction, Painter offered an alternate theory to convince voters who oppose rent control for that reason. The core of his argument, which he intimated was a standard Econ 101 lesson (despite over 90% of economists expressing disagreement with his conclusion), was:</p>
<blockquote><p>Price controls can actually spur an increase in supply. When housing developers have too much power in the market, they can maximize profits by raising rents on the apartments they already own. But if rent control limits that option, developers have to go to Plan B if they want to make more money: Build more units.</p></blockquote>
<p>The core of Painter’s argument was that the consolidation of the homebuilding industry due to the great recession (the number of builders was approximately halved from 2007 to 2012) and further subsequent concentration in the industry, had given builders monopoly power, which they were using to reduce construction. Consequently, he argued that imposing rent control would be able to tame their monopoly power to increase rents, and leave them with building more rental housing as their sole means to higher profits.</p>
<p>There were many holes in this argument, but there was too little time to it to effectively rebut it before the election.</p>
<p>First, Painter ignored the fact that a widely-cited reason for consolidation has been the growth of increased scale economies in the industry, from being able to offer workers more continuous employment in a tight industry labor market to savings from lower negotiated input prices and increased standardization to having specialists to deal with the industry’s regulatory mazes. Those growing advantages, which many industry publications have concluded has “made it <a href="http://seekingalpha.com/article/4136199-homebuilders-go-big-go-home" target="_blank"> nearly impossible for smaller builders to compete</a>,” points not to increasing monopoly power, but to large developers’ widely documented efficiencies, with substantial gains passed on to customers, which smaller, higher cost producers have trouble matching. Further, if big developers were just using increased market power to raise rental housing prices, it would also make smaller developers more profitable, but they are struggling to survive.</p>
<p>Second, the claim that reduced numbers of developers had given them monopoly power to reduce their production to raise rental housing prices is not credible. One <a href="https://www.wsj.com/articles/big-builders-are-remodeling-the-housing-market-1531474201" target="_blank"> article </a> from this July found that, in 2017, “the median market share captured by the top 10 builders in each of the country’s top 25 new-home markets was 63 percent,” and the one cited above said that nationally, “The top ten largest builders account for roughly a quarter of the total new home sales.” That is a far, far cry from monopoly.</p>
<p>Third, even if one thought that increasing concentration in homebuilding did confer monopoly power, there is an even bigger problem with the argument. It is not current homebuilding that determines rents, but the total rental housing stock. And even a substantial reduction in current construction by large developers would have only a small effect on the total rental housing stock, and therefore only a small effect on current rents.</p>
<p>Fourth, Painter’s assertion that rent control would expand rental housing construction by making that the only means to higher developer profits was also faulty. There is a good reason it runs contrary to one of the most agreed-upon results among economists. If rental housing in one location became less profitable to build and maintain, builders could convert to commercial or industrial construction, which are exempt from rent control’s restrictions. They could also move projects to locations with more friendly regulatory regimes. And each option, all of which Painter ignored, reduces rental housing construction in an area that imposes rent control. Further, he also ignored that by making housing construction for smaller builders less profitable, imposing rent control would reduce their construction as well.</p>
<p>Finally, Painter tried to present re-enabling local rent control impositions as just part of multiple reforms to expand rental housing construction, like easing density restrictions and reducing the power of NIMBY groups to stop development, by saying it is a “powerful complement” to them. However, those other policies, in fact, have the opposite effects on rental housing construction from rent control. Instead, it makes rent control the answer to “Which of these things is not like the others?”</p>
<p>Painter’s pro-Proposition 10 propaganda piece failed spectacularly in making its pro-rent control case. It tried to leverage the speed advantage of lies over truth in the last days before an election. Fortunately, however, it did not manage to swing the results. But there are always more elections on the way. We can only hope that lovers of liberty can discover how to make the truth limp faster, in order to get it to more people, than the last-minute misrepresentations we will see then.</p>
Gary Galles<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/yes1.PNG?itok=_Rf6LkcA" width="240" alt="yes1.PNG" />44626November 7, 2018 - 11:00 AMFront page feedUnion Diplomacy, Part 2: The Trent Affairhttps://mises.org/node/44644
<p>Season 3, Episode 30. After months of growing tension between the United States and Britain, a single event nearly plunged the two countries into war. When a Union naval officer illegally boarded a British mail ship and arrested two Confederate diplomats, many British leaders saw it as a deliberate provocation, engineered by William Seward, to provoke Britain into a war over its Canadian territory. After news of the arrest reached London, tempers were so high that many people, in reflection, believe that the only thing that prevented war was the delayed communication between the two countries that came from a broken telegraph cable. </p>
<p>Chris Calton recounts the controversial history of the Civil War. This is the 30th episode in the third season of Historical Controversies. You may support this podcast financially at <a href="http://Mises.org/SupportHC" target="_blank">Mises.org/SupportHC</a>.</p>
Chris Calton<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/Historical%20Controversies%20Podcast_750x516_Season3_20180412.jpg?itok=jP2U4Ibk" width="240" alt="Introduction to the Civil War" title="Introduction to the Civil War" />44644November 7, 2018 - 11:00 AMFront page feedCannabis Victories!https://mises.org/node/44645
<p>There were three important victories related to cannabis yesterday, including the states of Michigan, Missouri and Utah which are far from being lefty hippy states! Only in North Dakota did the ballot measure fail.</p>
<p>Michigan passed full adult recreational legalization of cannabis by a 54-46 margin making it the 10th state to do so.</p>
<p>Missouri became the 31st state to legalize medical marijuana use. There were three cannabis amendments on the ballot and the one that passed will tax marijuana sales at just 4 percent. Of the three, it was the only proposal that allowed for home-growing of cannabis so it would seem that it was the most radical of the three choices.</p>
<p>Utah became the 32nd state to legalize medical marijuana use even though the Church of Jesus Christ of Latter-day Saints campaigned against it!</p>
<p>Only in North Dakota did voters strike down Measure 3 which would have been the nation’s best recreational law, allowing citizens to grow, consume and possess as much cannabis as they want, without any government intervention.</p>
<p>Also the Democrats took control of the State Senate in New York and with Governor Cuomo flipping to the right side it looks cannabis legalization will be up for solid debate during the next session of the legislature.</p>
<p>Given that the FDA has given its first approval of a cannabis drug product and that Canada has legalized, I would say that this ideological battle has been won!</p>
<p>UPDATE: America’s biggest meathead, Pete Sessions (R-Texas), was defeated. Sessions has been blocking cannabis reform legislation in Congress and will be replaced by a Democrat. His opponent is a former NFL football player Colin Allred. Trump and Pence campaign for Session. I sent Allred's campaign a small donation and I think its the first time in history that a campaign that I contributed actually won! </p>
<p> </p>
Mark Thornton<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/inevitable.jpeg?itok=dupPtpFW" width="240" alt="inevitable.jpeg" />44645November 7, 2018 - 10:30 AMFront page feedOn Votinghttps://mises.org/node/44637
<p>Since each person votes for different reasons, we can't morally say that the outcome of an election binds people to any specific law or policy.</p>
<p>Original article (excerpted from <em>No Treason No. VI: The Constitution of No Authority</em>): <a href="https://mises.org/wire/voting" target="_blank">"On Voting"</a>.</p>
<p>Narrated by Matt Pritchard.</p>
Lysander Spooner<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/AudioMisesWire_750x516_20180223.jpg?itok=5JRlqpkV" width="240" alt="Audio Mises Wire" title="Audio Mises Wire" />44637November 7, 2018 - 9:30 AMFront page feedWhy Free Markets Are Better than Globalismhttps://mises.org/node/44489
<p><strong>Globalists: The End of Empire and the Birth of Neoliberalism<br />by Quinn Slobodian<br />Harvard University Press, 2018<br />x+381 pages</strong></p>
<p>Quinn Slobodian, a historian at Wellesley College, tells us that <em>Globalists </em>“is a long-simmering product of the Seattle protests against the World Trade organization in 1999. I was part of a generation that ... became adolescents in the midst of talk of globalization and the End of History ... we were made to think that nations were over and the one indisputable bond uniting humanity was the global economy. Seattle was a moment when we started to make collective sense of what was going on and take back the story line. ... This book is an apology for not being there and an attempt to rediscover in words what the concept was that they went there to fight.”</p>
<p>Slobodian discloses here a confusion that mars his book. He sees little difference between the free market and a governmentally imposed regime of globalization. Rule over the European economy by Brussels bureaucrats and attempts to control world trade by the WTO and the World Bank stem from a “Geneva School” that includes Ludwig von Mises. His view must at once confront an objection. Mises supported a complete free market, with a minimal state; how then can he have helped bring about a globally directed economy? Slobodian’s answer is this: Mises wished to use force to compel people to accept a system of private property, run in the interests of business. He professed to favor freedom but in fact supported coercion. The distance between Mises and global governance of the economy, which likewise imposes its plans on people, is not far.</p>
<p>Friedrich Hayek counts even more than Mises as a supporter of this line of thought, and many contemporary neoliberals have been influenced by him. Like Mises, he wanted to limit democracy to promote private property and the market. Hayek, though, countenanced more government intervention than Mises. Slobodian, by the way, cites Hans Hoppe’s criticism of Hayek for this, though he has missed Mises’s review of Hayek’s <em>The Constitution of Liberty</em>, dealing with the same issue.</p>
<p>As Slobodian sees matters, the rise of colonial peoples to independence in the twentieth century posed a problem for those, like Mises and Hayek, committed to capitalism. What would happen if the new countries, dissatisfied with what they viewed as exploitation by the developed countries, enacted restrictions on trade? Combined with this was a threat to business interests by anti-capitalist classes and parties in the developed world. What if, e.g., socialists won power in a democratic election?</p>
<p>To prevent these dire developments, Mises and Hayek promoted world federalism. The power of national governments to control the free market would be strictly limited. Property rules would be a matter of international law, enforced by a central authority.</p>
<p>Slobodian merits great credit for his detailed account of Mises and Hayek’s interest in world federalism, but he fails to grasp the fundamental issue motivating what they said. For Mises, the free market was the only viable system of social cooperation. Accepting it fully would bring peace and prosperity. Government interferences with the economy would necessarily fail to achieve their purpose. Price controls would not make goods available to the poor but would instead cause shortages. Socialism would collapse into chaos.</p>
<p>For Mises, these were incontrovertible truths established by economic science. The issue for him was not imposing economic freedom on people by force, but rather persuading them that freedom was the best course of action. Constitutional limits to democracy, including federalist plans, were strictly subordinate to promoting the free market. Mises does not say that he favored forcing people to accept these limits, if they were to vote freely against them. Violent attempts to overthrow a legal system of private property are an altogether different matter. It is hardly “undemocratic” to oppose them.</p>
<p>Slobodian does not agree. For him, to suppress violence against property is undemocratic. Mises claimed that the free market was controlled by the monetary votes of consumers, but Slobodian finds this freedom lacking: “[D]emocracy was not an absolute value for Mises ... a crucial complement to voters’ democracy was what he would later call a ‘consumer’s democracy,’ expressed by purchases and investments in the marketplace. ... Wealth, he wrote, was ‘always the result of a consumer’s plebiscite.’” But when the Social Democrats called a general strike in Vienna in 1927, Mises supported its violent suppression. Does this not show his commitment to democracy was limited? “In 1927, democracy had ceased to fulfill its primary function. It did not prevent revolution. In that case, Mises believed, it was perfectly legitimate to suspend it and enforce order by other means.”</p>
<p>Contrary to Slobodian, Mises’s position was perfectly consistent. Mises supported peaceful cooperation through the free market. Political democracy, in his view, promoted peace. But it is not undemocratic to use emergency powers to suppress violence.</p>
<p>For Mises, schemes for international organization were intended only as means to promote the free market. When Mises realized that in the statist climate of the day, these plans could not work, he for the most part abandoned them. In <em>Omnipotent Government</em>, e.g., he says: “Under present conditions an international body for foreign trade planning would be an assembly of the delegates of governments attached to the ideas of hyper-protectionism. It is an illusion to assume that such an authority would be in a position to contribute anything genuine or lasting to the promotion of foreign trade.”</p>
<p>Slobodian does not see what is at stake in the dispute over the free market because, for him, economic arguments for the market are mere business propaganda. He does not grasp that the argument for free exchange follows from elementary economic theory. People would not willingly engage in trade if they did not expect to benefit. This consideration by itself strikes a fatal blow at tariffs and other trade restrictions.</p>
<p>Slobodian ignores this and, displaying both his fascination with Hayek’s thought and his repulsion from it, he takes the case for the free market to be complex and mystifying. “Yet even as he [Hayek] disparaged the fallacy of computer-aided models, he drew inspiration from the same source of system theory. From the language of ‘pattern predictions’ to his citation of Warren Weaver, Hayek did not argue against system theory in his Nobel speech but with it.” </p>
<p>In trying to establish a line of continuity between the “Geneva School” and today’s global bureaucrats, Slobodian places great stress on the “Ordo liberals.” This group, which included Franz Böhm and Walter Eucken, favored a very active government to promote the social institutions for a “social market economy.” Many of these authors were influenced by Hayek, but in his erudite discussion, Slobodian has missed the fact that Mises had little use for them. As Guido Hülsmann points out in <em>Mises: The Last Knight of Liberalism</em>, “And the prospect of cooperating with the fashionable Ordo School, be it in the Mont Pèlerin Society or elsewhere, did not exactly warm his heart either. He believed the Ordo people were hardly better than the socialists he had fought all his life. In fact, he eventually called them the ‘Ordo-interventionists.’”</p>
<p>The book contains many strengths. The discussion of the activities of Michael Heilperin, an outstanding supporter of free trade, is especially well done. Slobodian displays a fine eye for architectural detail, evident, e.g., in his description of the Chamber of Commerce building on Vienna’s Ringstrasse.</p>
<p>That said, the book also has its share of errors. Harold Laski was a political scientist, not an economist. Garrett Hardin was a biologist, not a philosopher. Hans Kelsen was not among the Austrian elite who moved in the 1930s in the same circles as the British elite. Arthur Balfour is given the wrong title.</p>
<p>The book’s main failing, though, does not lie in these minor errors. It lies rather in Slobodian’s refusal to take seriously arguments for the free market. Limits on government control of property are for him simply ideological efforts by business to limit the popular will. He here adopts exactly the viewpoint of Nancy MacLean’s <em>Democracy in Chains</em>, a disaster for scholarship. Slobodian operates on a much higher level than she does, though he does not scruple to cite her book.</p>
David Gordon<img typeof="foaf:Image" src="https://mises-media.s3.amazonaws.com/styles/slideshow/s3/static-page/img/Globalists%20cover.jpg?itok=lu74kLSx" width="240" alt="Globalists" title="Globalists" />44489November 7, 2018 - 6:00 AMFront page feedAustrian Student Scholars Conference 2019https://mises.org/node/44623
44623November 6, 2018 - 3:30 PMFront page feed